BUS 250 CH.20 (worksheets & homework)

If a party to a contract wants to send an approval to the other party, how will he know where to send it?

It is sent to the addresses in the "notices" section of the contract.

Pre-reading

Think about provisions that are important to you, so you do not lose sight of the big picture later.

What-ifs

Think about various outcomes, as well as worst-case scenarios. Does the contract produce results you want?

What does it mean to "control the pen?"

To prepare the first draft of the contract.

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

True

In the case of a typo, a court will reform a contract if there is clear and convincing evidence that the alleged mistake does not actually reflect the true intent of the parties.

True

It is possible to form a binding contract without intending to.

True

One purpose of contracts is to avoid litigation.

True

Some contracting parties are intentionally vague in contract terms.

True

A party who wants to be sure it is not obligated to perform under a contract if the other party breaches should

make the terms of the agreement conditional, nor reciprocal.

To constitute a violation of a contract, the breach must be

material

Lawyers should work to facilitate deals, rather than hinder them. In the long run, it is easier to draft a contract that provides _______ protection than you need because it prevents _______.

more; unpleasant surprises later on

_______ occurs when the parties do not want the contract to be clear. _______ is different; it means that the provision was _______ unclear.

vagueness; ambiguity; accidentally

What is a force majeure event?

a disruptive, unexpected occurrence for which neither party is to blame that prevents one or both parties from complying with a contract

A promise in a contract is called a _______.

covenant

In contract law, boilerplate

creates a private law that governs disputes between the parties.

In a contract modification, the phrase "charged with such amendment" refers to

the party who will be adversely affected by the change.

In the case of scrivener's error, a court will reform a contract if _______.

there is clear and convincing evidence that the alleged mistake does not actually reflect the true intent of the parties.

Unlike business people, lawyers are trained pessimists - _______.

they try to foresee and protect against everything that can possibly go wrong

Which of the following are advantages of hiring a lawyer?

- She can serve as the bad guy. - It communicates to the other parties that you will not be taken advantage of. - It communicates to other parties that you are taking the deal seriously.

Some contracts require that any amendments be in writing. Which of the following are ways that a written amendment can be added to a contract?

- Signing an amendment - Crossing out the wrong language and replacing it by hand with the correct terms - Rewriting the entire contract to include the changed provisions

Select the four situations in which you should definitely sign a written contract:

- The terms are complex - You do not have an ongoing relationship of trust with the other party - The deal is crucial to your life or the life of your business - he Statute of Frauds requires it

Select the three reasons why ambiguities are interpreted against the drafter of the contract:

- To protect people who are unlikely to be represented by a lawyer - To encourage those who prepare contracts to do so carefully - To protect laypeople from the dangers of form contracts they cannot change

Force Majeure

A disruptive, unexpected occurrence that prevents one or both parties from complying with the contract.

A+ Modeling Agency signs a contract with Sandi to do a photo shoot for the local used car dealer's advertising. The contract was most likely written by

A+ Modeling Agency's lawyer.

Good faith

An honest effort to meet both the spirit and the letter of the contract.

Ralph is a professional football player. He signs a valid contract with the Miami Dolphins. Later, he claims that he was also promised free use of the Dolphins' private jet, but this was not in the contract. What type of clause in his contract would prevent him from flying away with this claim?

An integration clause

Severablilty

Asks the court to delete an unenforceable clause, rather than void the whole contract.

Why do lawyers prefer to negotiate touchy subjects at the beginning of a relationship?

Because everyone is eager to make a deal, and lawyers want to avoid unpleasant surprises later on.

Bob, a house painter, contracts with Ollie to paint a rental house which Ollie owns. Bob hires Rob to take his place as the painter on this contract. What has Bob done?

Delegated his duties

Ambiguities in contracts are always interpreted in favor of the side that wrote the contract, since they are the ones who know what the provision is supposed to mean.

False

Contracts must use formal terminology such as "whereas" and "heretofore" in order to be legal.

False

Emily runs a children's clothing boutique which takes in local homemade items on a consignment basis. Her standard form contract indicates that Emily has the right to put items on sale without prior approval, but does not specify what effect the sale has on the consignor's payment percentage. Her intent is to keep the same profit she would have had without the sale. She is using ambiguity in her contract to increase her sales and profit.

False

If you have an established relationship with a buyer, you can sell small tracts of land without a written contract.

False

It is unethical to use your lawyer as an excuse for a provision of a contract, such as, "My lawyer insists that I have a liquidated damages clause..."

False

Lawyers prefer to negotiate touchy subjects as they arise rather than address them at the beginning of a relationship.

False

The vast majority of contracts have either liquidated damages or damage caps.

False

You should hire a lawyer to review any legal papers you have to sign, especially such papers as lease agreements or car purchases.

False

Farmer's Fortune Insurance has a contract with Farmer Fran to insure her crops against insect damage. The contract does not specify which insects are covered or how much damage is necessary to make a claim. The contract will probably be enforced in favor of

Farmer Fran.

To whom are businesspeople referring when they mention the "business prevention department?"

Lawyers

Reasonably

Ordinary or usual under the circumstances.

Integration

Prevents either side from later claiming that the two parties had agreed to additional provisions.

Arbitration

Prevents the parties from suing in court and mandates alternative dispute resolution.

The second read

Read the contract to make sure that it handles the what-ifs in a manner that is satisfactory to you.

The first read

Read to get a basic idea of the structure and major provisions of the contract.

If the plaintiff in Quake Construction, Inc. v. American Airlines, Inc. could not get a commitment from its subcontractors until it was certain it had the job, what should it have done?

Send the defendant its own letter of intent.

With sole discretion

The absolute right to make any decision on that issue.

Which of the following is generally NOT in the introductory paragraph of a contract?

The covenants of the contract

In Dick Broadcasting Co. v. Oak Ridge FM, Inc. the court held that:

The implied covenant of good faith and fair dealing does not create new contractual rights or obligations.

Nate works as a carnival barker. His employment contract specifies that he can be fired if he "loses his voice." This is an example of

ambiguity.

When a provision in a contract is unclear by accident, it is a case of

ambiguity.

Standard provisions in a contract that are often listed under the heading "Miscellaneous" are called

boilerplate

Which of the following is NOT one of the three ways to amend a written contract?

by verbally agreeing to the changes and shaking hands on the deal

Heritage Technologies LLC v Phibro-Tech, Inc. demonstrates that typos

can occur even in carefully drafted agreements.

Which of the following is a standard provision frequently found in contracts?

choice of forum

An honest effort to meet both the spirit and letter of the contract is termed

good faith.

Rich and Archie sign an agreement in which Archie agrees to deliver ten cases of champagne in 5 days. The parties negotiated and meant to say in the written agreement, delivery in 50 days. If the evidence is clear that the two parties intended to agree to 50 days, the courts will probably

reform the contract.

Statements of fact about the past and present are called

representations and warranties

When hiring a lawyer,

select someone who anticipates risks and presents options.

If an individual signs a contract without indicating she is doing so in her role as an employee of a party to the contract

she is personally liable.

Representations and warranties are _______.

statements of facts about the past or present.

In Minkler v. Safeco Ins. Co. of America the court held that

the ambiguities in the contract must be interpreted to protect the reasonable expectations of the insured.

In Quake Construction, Inc. v. American Airlines, Inc. the parties disagree on _______, a dispute caused by the _______ the letter of intent.

whether or not there was a binding agreement; the vagueness of