Intro to Business Law

Representation

Statement of fact about the past or present

Michael and Scarlett cannot agree on the price he will pay her to manage his hotels in the third year of their contract. They agree to a provision stating that the price will be "reasonable." This provision is . Parties should never include such a provision in a contract unless .

vague; they are sure they will be able to reach an agreement later

Daniel and Annie signed a contract providing that Daniel would lend $50,000 to Annie's craft beer business at an interest rate of 8 percent. During negotiations, Daniel and Annie agreed that the interest rate would go down to 5 percent once she had sold 25,000 cases. This provision never made it into the contract. After the contract was signed, Daniel orally agreed to reduce the interest rate to 6 percent once volume exceeded 15,000 cases. The contract had an integration provision but no modification clause. Annie has sold 30,000 cases. What interest rate must she pay?

6%

MATERIAL BREACH

A material breach is important enough to defeat an essential purpose of the contract.

SOLE DISCRETION

A party with sole discretion has the absolute right to make any decision on that issue.

SCRIVENER'S ERROR

A scrivener's error is a typo. In the case of a scrivener's error, a court will reform a contract if there is clear and convincing evidence that the mistake does not reflect the true intent of the parties.

AMBIGUITY

Any ambiguity in a contract is interpreted against the party that drafted the agreement.

A contract states that Buzz Co. legally exists and will provide 2,000 pounds of wild salmon each week. Which of the following statements is true?

Clause 1 is a covenant, and Clause 2 is a representation.

GOOD FAITH

Good faith means an honest effort to meet both the spirit and letter of the contract.

REASONABLY

Reasonably means ordinary or usual under the circumstances.

Conditional promise

Promises that a party agrees to perform only if the other side has first done what it promised

Reciprocal promise

Promises that are each enforceable independently

(T/F) A force majeure clause indicates who has the authority to write the first draft of the contract.

False

(T/F) For a modification to a contract to be valid, both parties must sign it.

False

(T/F) The same states must be named in the Choice of Law and Choice of Forum provisions.

False

A contract provided, "On January 5, Purchaser shall provide Seller with a certified check in the amount of $100,000. Seller shall transfer a deed for the Property to Purchaser." What is wrong with this provision?

It is not clear who Purchaser and Seller are.

Covenant

Promise about what a party will do in the future

The following list provides reasons why a party would strongly consider putting a contract in writing. Which of these reasons is least important?

The parties reside in different jurisdictions.

STRUCTURE OF A CONTRACT

The structure of a contract looks like this: 1). Title 2). Introductory Paragraph 3). Definitions 4). Covenants -Covenants are the promises the parties make about what they will do in the future. 5). Breach 6). Conditions 7). Representations and Warranties -Representations and warranties are statements of fact about the present or past—they are true when the contract is signed (or at some other specific, designated time). 8). Boilerplate -Choice of Law and Forum -Modification -Assignment of Rights and Delegation of Duties -Arbitration -Attorney's Fees -Integration -Severability -Force Majeure -Notices -Closing

Assignment of rights

Transfer of benefits under a contract

Delegation of duties

Transfer of obligations under a contract

(T/F) A severability provision asks the court simply to delete the offending clause and enforce the rest of the contract.

True

(T/F) Unless the contract provides otherwise, both sides in a contract dispute pay their own legal fees.

True

VAGUENESS

When a provision in a contract is deliberately left unclear.

Liesl purchased an insurance policy on her house. The policy stated that the insurance company was not liable for any damage to her house caused by vandalism or burglary. An arsonist burned down Liesl's house. Is the insurance company liable?

Yes, because the language is ambiguous and should be interpreted against the insurance company.