Contract formation

International legal englishContract formationMatch the questions with paragraphs that answer themA What form can an enforceable contract take?B When do third parties possess enforceable rights in a contract?C Upon which grounds related to the formation of a contract may its validity be attacked?D What are the elements of an enforceable contract?E What are the essential terms of a contract?1.1. Under the common law, a promise becomes an enforceable contract when there is an offer by one party (offeror) that is accepted by the other party (offeree) with the exchange of legally sufficient consideration (a gift or donation does not generally count as consideration); hence the equation learned by law students: offer + acceptance + consideration = contract. The law regards a counter offer as a rejection of the offer. Therefore, a counter offer does not serve to form a contract unless, of course, the counter offer is accepted by the original offeror.2.2. For a promise to become an enforceable contract, the parties must also agree on the essential terms of the contract, such as price and subject matter. Nevertheless, courts will enforce a vague or indefinite contract under certain circumstances, such as when the conduct of the parties, as opposed to the written instrument, manifests sufficient certainty as to the terms of the agreement.3.3. An enforceable agreement may be manifested in either written or oral words (an express contract) or by conduct or some combination of conduct and words (an implied contract). There are exceptions to this general rule. For example, the Statute of Frauds requires that all contracts involving the sale of real property be in writing.4.4. In a contractual dispute, certain defences to the formation of a contract may permit a party to escape his/her obligations under the contract. For example, illegality of the subject matter, fraud in the inducement, duress and the lack of legal capacity to contract all enable a party to attack the validity of a contract.5.5. In some cases, individuals/companies who are not a party to a particular contract may nevertheless have enforceable rights under the contract. For example, contracts made for the benefit of a third party (third-party beneficiary contracts) may be enforceable by the third party. An original party to a contract may also subsequently transfer his rights/duties under the contract to a third party by way of an assignment of rights or delegation of duties. This third party is called the asignee in an assignment of rights and the delegate in a delegation of dutiesMatch these defences with their definitions: 1. illegality of the subject matter, 2. fraud in the inducement, 3 duress, 4 lack of legal capacityA) when one party does not have the ability to enter into a legal contract, i.e, is not of legal age, is insane or is a convict or enemy alienB) when one party induces another into entering into a contract by use or threat of force, violence, economic pressure or other similar meansC) when either the subject matter (e.g. the sale of illegal drugs) or the consideration of a contract is illegalD) when one party is intentionally misled about the terms, quality or other aspect of the contractual relationship that leads the party to enter into the transactionUnderstanding contractsLawyers are usually involved at the formation stage of a contract, which includes advising, drafting and negotiating. Drafting is commonly carried out with the help of contract templates or forms. Nevertheless, legal counsel must advise on the inclusion or omission of clauses and their wording. To do this, familiarity with common clause types and the language typically used is necessaryMatch these types of contract clauses with their definitions: 1,acceleration, 2.assignment, 3.confidentiality,4. consideration, 5.Force Majeure, 6.liquidated damages, 7.entire agreement, 8.severability, 9.termination, 10.payment of costsA clause stating that the written terms of an agreement may not be varied by prior or oral agreements because all such agreements have been consolidated into the written documentB Clause designed to protect against failures to perform contractual obligations caused by unavoidable events beyond the partys control, such as natural disasters or warsMatch these types of contract clauses with their definitions: 1.acceleration, 2.assignment, 3.confidentiality, 4.consideration, 5.Force Majeure,6. liquidated damages, 7.entire agreement, 8.severability, 9. termination, 10.payment of costsC clause outlining when and under which circumstances the contract may be terminatedD clause concerning the treating of information as private and not for distribution beyond specifically identified individuals or organisations, or used other than for specifically identified purposesE clause in a contract requiring the obligor to pay all or a part of a payable amount sooner than as agreed upon the occurrence of some event or circumstance stated in the contract, usually failure to make paymentMacha these types of contract clauses with their definitions: 1.acceleration, 2.assignment, 3.confidentiality, 4.consideration, 5.Force Majeure,6. liquidated damages, 7.entire agreement (Parol Evidence), 8.severability, 9.termination, 10.payment of costsF clause in a contract requiring which party is responsible for payment of costs related to preparation of the agreement and ancillary documentsG clause expressing the cause, motive, price or impelling motive which induces one party to enter into an agreementH clause referring to an amount predetermined by the parties as the total amount of compensation a non-breaching party should receive if the other party breaches a part of the contract1.acceleration, 2. assignment, 3. confidentiality, 4. consideration, 5. Force Majeure, 6. Liquidated Damages. 7. Entire Agreement, 8. Severability, 9. Termination, 10. Payment of costsI clause prohibiting or permitting assignment under certain conditionsJ clause providing that, in the event that one or more provisions of the agreement are declared unenforceable, the balance of the agreement remains in force

Severability Theseverabilityclause states that the terms of the contract are independent of each another, so that if a term in the contract is deemed unenforceable by a court, the contract as a whole will not be deemed unenforceable. It may contain two parts: (a) savings language to preserve the validity of all other terms in the event that one provision is determined to beunenforceable; and (b) reformation language to scale back overly broad provisions to terms and scope that are enforceable(such as limiting the time and geographic scope of non-compete covenants).

Key1e2i3d4g5b6h7a8j9c10fIdentify the type of clause exemplified by each of these clauses1. The sellers liability for damages shall in no case exceed the purchase price of the particular quantity delivered with respect of which damages are claimed.2. Whenever, within the sole judgment of Seller, the credit standing of Buyer shall become impaired, Seller shall have the right to demand that the remaining portion of the contract be fully performed within ten (10) days.Key1. liquidated damages2. accelarationPlain English1. if the seller breaches the contract, or part of the contract, he may have to pay compensation to the purchaser. The maximum amount of that compensation is fixed. It cant be more than the value of the delivery that led to the breach of contract (in other words, the price per item times the number of items in that delivery). Of course, the actual compensation might be much less than that, but it cant be more than that.Plain English2. The buyer has a reputation for paying debts on time, which the seller uses to calculate a credit standing for that buyer. If the seller decides that the buyers credit rating has got worse, for example if the buyer has failed to pay one of the instalments on time, the seller can force the buyer to pay all the remaining instalments within ten days.Identify the type of clause exemplified by each of these clauses3. Neither party shall be liable in damages or have the right to terminate this Agreement for any delay or default in performing hereunder if such delay or default is caused by conditions beyond its control including, but not limited to, acts of God, government restrictions (including the denial or cancellation of any export or other necessary licence), wars, insurrections and/or any other cause beyond the reasonable control of the party whose performance is affected.KeyForce MajeurePlain English3. this clause protects both parties in case something unexpected happens which they cant control. For example, there might be a natural disaster (earthquake), or the government might deny or cancel one of their export licenses, or there might be a war. If anything like this happens, the party who is affected doesnt have to pay damages for any failure to pay or deliver on time. The other party isnt allowed to cancel the contract as a result of these unexpected problems. This only applies to deliveries or payments which are directly affected by the unexpected eventIdentify the type of clause exemplified by each of these clauses4. This Agreement may not be assigned without the prior written consent of the other party, except that Buyer may assign the Agreement to a subsidiary or related corporation so long as the owners of at least seventy-five per cent (75%) of the stock of such corporation are either Buyer or the shareholders of Buyer.KeyAssignment Plain English4. The buyer is allowed to assign the agreement to another company if the buyer or the buyers shareholders own at least 75% of that other company. Apart from this situation, if either party wants to assign the agreement to a third party, they have to get written permission from the other party first.Identify the type of clause exemplified by each of these clauses5. In the event Operator defaults in the performance of any covenant or agreement made hereunder, as to payments of amounts due hereunder or otherwise, and such defaults are not remedied to the Suppliers satisfaction within ten (10) days after notice of such defaults, the Supplier may thereupon terminate this agreement and all rights hereunder of the Operator but such termination shall not affect the obligations of the Operator to take action or abstain from taking action after termination hereof, in accordance with this agreementKeyTerminationPlain English5. If the operator fails to make the necessary payments, the supplier will give the operator ten days to make the payments. If the operator still fails to make the payments after those ten days have passed, the supplier has the right to cancel the contract. If this happens, the operator loses all the rights he had under the contract, but he doesnt lose his obligations.Identify the type of clause exemplified by each of these clauses6 This Agreement, including the Schedules and Exhibits attached hereto, constitutes and contains the entire agreement of the parties with respect of the subject matter hereof and collectively supersedes any and all prior negotiations, correspondence, understandings and agreements between the parties respecting the subject matter thereof. No party is relying on or shall be deemed to have made any representations or promises not expressly set forth or referred to in this Agreement.KeyEntire Agreement/Merger/Parol EvidencePlain English6. This agreement is the complete agreement between the parties; no other documents connected with it are valid any more. In other words, all old agreements, promises, representations or documents which are connected with the new agreement have been replaced and should be ignored from now on.Explain the following words and expressions1. Liability for damages (clause 1)2.Within the sole judgment of Seller (clause 2)3. delay or default (clause 3)4. prior written consent (clause 4)5. in the event Operator defaults in the performance(clause 5)6. abstain from taking action (clause 5)7. Schedules and Exhibits (clause 6)8. Deemed (clause 6)Liability for damagesResponsibility to pay compensationWithin the sole judgment ofThe party alone can decideDelay or defaultCarry out later or not at allPrior written consentAgreement given before in writingIn the event Operator defaultsIf Operator defaults in performanceAbstain from taking actionDo nothingSchedules and ExhibitsAttachmentdeemedconsideredA covenant1. What kind of agreement is it?2. Why does the text have gaps in it?3. What type of clauses are 2b, 3, 5 and 6?

NON-COMPETITION AGREEMENT OF SHAREHOLDER OF SELLER IN CONNECTION WITH SALE OF ASSETSCOVENANT NOT TO COMPETEThis COVENANT NOT TO COMPETE (the Covenant, dated as of ____, 20__, is made and entered into by and between ___(Shareholder) and ____, a ____ corporation (Purchaser, with reference to the following facts:COVENANT NOT TO COMPETEA ______, ______ corporation (Seller), and Purchaser are parties to that certain Asset Purchase Agreement, dated as of ___, 20__ (as amended, supplemented or otherwise modified from time to time, the Purchase Agreement), pursuant to which Purchaser agreed to purchase from Seller, and Seller agreed to sell to Purchaser, certain assets of the ___business owned and operated by Seller located at ____(the Business). Unless otherwise noted, capitalized terms used herein shall have the meanings ascribed to them in the Purchase Agreement.COVENANT NOT TO COMPETEB Shareholder owns all of the issued and outstanding capital stock of Seller.C Shareholder, during the course of ownership and operation of the Business, has acquired numerous business contacts among the public, financial institutions and ___industry employees.D Purchaser shall expend a considerable amount of time, money, and credit with respect to the purchase and operation of the Business.lCOVENANT NOT TO COMPETEE Purchaser does not desire to expend such time, money, and credit and then subsequently compete with Shareholder in the business of____F It is a condition precedent to the closing of the transactions contemplated by the Purchase Agreement (the Closing), that Shareholder execute and deliver this Covenant and that Purchaser pay Shareholder certain amounts at Closing, all as more fully described below.COVENANT NOT TO COMPETETHEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:COVENANT NOT TO COMPETE1. For a period of ____years from the date hereof, Shareholder shall not have any controlling ownership interest (of record or beneficial) in, or have any interest as a director, principal executive officer, key employee, agent or consultant in, any firm, corporation, partnership, proprietorship, or other business that engages in any of the following activities within a ___mile radius of the Businesss current location (describe).

COVENANT NOT TO COMPETEWhat type of clauses are 2b, 3, 5 and 6?

2. Additionally, Shareholder shall:A not refer prospective purchases or lessees of ___in ___, other than the Business; andB subject to any obligation to comply with any law, rule, or regulation of any governmental authority or other legal process to make information available to the person entitled thereto, keep confidential and shall not use or permit his attorneys, accountants, or representatives to use, in any manner other than for the purpose of evaluating the transactions contemplated by the Purchase Agreement, any confidential information of Purchaser which Shareholder acquired in the course of the negotiation of the transactions contemplated by the Purchase Agreement.COVENANT NOT TO COMPETEWhat type of clauses are 2b, 3, 5 and 6?

3 As consideration for the agreements of Shareholder set forth in Sections 1 and 2 above, Purchaser shall, at the Closing, deliver to Shareholder $___by wire transfer of immediately available funds in such amount to a bank account designated by Shareholder.4. The term of this Agreement shall be ___months, commencing on the date hereof. COVENANT NOT TO COMPETEWhat type of clauses are 2b, 3, 5 and 6?

5. In the event that any provision or any part of any provision of this Agreement shall be void or unenforceable for any reason whatsoever, then such provision shall be stricken and of no force and effect. However, unless such stricken provision goes to the essence of the consideration bargained for by a party, the remaining provisions of this agreement shall continue in full force and effect, and to the extent required, shall be modified to preserve their validity.COVENANT NOT TO COMPETE6. In the event of any litigation or legal proceedings between the parties hereto, the non-prevailing party shall pay the expenses, including reasonable attorneys fees and court costs, of the prevailing party in connection therewith.Agreed to as of this___day of ___, 20__ShareholderPURCHASER____By___Its____What type of clauses are 2b, 3, 5 and 6?Key2b confidentiality3 consideration5 severability6 payment of costsLanguage notescovenantnoun \kv-nnt, k-v-\A legally binding agreement. It typically requires an owner of real property to do (or refrain from doing) somethingLanguage notesCapitalized terms are those which are consistently written with a capital letter.How many capitalised terms are there in this covenant? 8: Covenant, Shareholder, Purchaser, Seller, Purchase Agreement, Business, Closing, AgreementThe capital letter shows that these terms are definedThe uncapitalised shareholder refers to any shareholderLanguage notesParagraph A is potentially ambiguous as to what is actually sold: does the Business refer to the business owned and operated by Seller or to certain assets of thebusiness? This is defined in the Purchase AgreementLanguage notesIssued capital stock: the total amount of a companys stock that has been issued and represents the total capitalized value of the company. Language notesOutstanding capital stock: the number of shares of capital stock that have been issued and that are in public hands. Outstanding stock excludes shares issued but subsequently repurchased by the issuer as treasury stock. Outstanding stock is used in the calculation of book value per share and earnings per share. Also called shares outstanding, stock outstanding.Language notesParagraphs D and E refer to time, money and creditCredit here refers to borrowing capacity. In other words, the Purchaser has borrowed money and can therefore borrow less for other investmentsPrecedent used as an adjective in paragraph F; means preceding or before: the Covenant must be completed before the Purchase Agreement can be closed.Paragraph F says that the shareholder must execute the Covenant. Execute means simply sign.Language notesParagraph 1 mentions controlling ownership interest (of record or beneficial). A shareholder of record is the person named on the share certificate as the owner, but in fact the beneficial owner (=the real owner) may be somebody else. E.g. for tax reasons, a shareholder might buy some shares in the name of one of her children, but she has the advantages of being a shareholder.Language notesA lessee a person who leases (i.e. rents) sth, typically property, from somebody elseLanguage notesParagraph 2b starts in a very confusing way: it looks as if the Shareholder shall subject somebody to something. In fact subject to is used as a preposition, here meaning broadly in accordance with. In other words, the Shareholder is obliged to keep certain information confidential, as long as he isnt going to break any laws by doing so.Language notesWire transfer = electronic transfer of fundsProvision of an agreement - a clause which states a condition that must be metStricken an alternative past participle of strike; when strike means hit, its past participle is struck. When it means delete, its past participle is stricken. In both cases the past simple form is struck.Find the verbs, italicised in the text, which match these definitions (1-7)1 to follow2 will be taken out 3 given to4 beginning5 has bought6 envisaged in7 will spendFill in the gapsDateSomebodys nameCompanys nameRelevant jurisdiction of the corporationCompanys nameThe relevant jurisdiction of the corporationDay and monthyearSpecification of business (name)AddressThe name of the branch of industryThe name of the branch of industry Specification of time (number of years)Specification of space (number of miles)Type of a product or serviceThe name of a placeAmount of moneyNumber of monthsShareholders signatureSignature of the representative of the purchasing corporationPosition of signatory in purchasing corporation, e.g. DirectorWhat do the following referring devices refer to?

1. Pursuant to which( Paragraph A)2. Capitalized terms used herein (Paragraph A)3. In consideration of the foregoing (Before Paragraph 1)4 the receipt and sufficiency of which are hereby acknowledged..5the parties hereto agree6. from the date hereof(Paragraph 1)7. the person entitled thereto (Paragraph 2b)8. On the date hereof such provision (Paragraph 4)10. proceedings between the parties hereto (Paragraph 6)In connection therewith (Paragraph 6)Key1. Pursuant to the Asset Purchase Agreement2. capitalized terms used in this covenant3. in consideration of paragraphs A-F4. the receipt and sufficiency of the good and valuable consideration are acknowledged by stating this sentence5. the parties to this Covenant agree6. from the date of this Covenant7. the person entitled to information8. on the date of this Covenant9. any provision which is void or unenforceable10. proceedings between the parties to this Covenant11. in connection with that litigation or those legal proceedingsParaphrasing clauses: explain the contents of the clauses as if you were speaking to a client with little knowledge of the lawThis clause deals withand it says thatAccording to his clause, the parties agree toThis clause regulates.. It simply says thatThis is about what happens when.. In such a caseHere it says, which means thatThis part basically just says thatA memoA formal text type used, for example, to outline or clarify a point of law or to provide a brief opinion on a case. Memos can be external (e.g. to a client) or internal (e.g. to another lawyer in the same firm). In either case, a memo serves to circulate information that requires the attention of its readersMatch the haves of these sentences explaining the elements of a memo: heading, the subject line, the context, In the main message, the action closeA refers to any sentences providing background information about the project in question (such as a reference to an event or to a previous request for informationB individual points should be organised in descending order of importance, i.e. most important ones first, subordinate or supporting points laterC is a clear call to action an explanation of what should be done in what way, by whom and by what date1heading, 2 subject line, 3context, 4In the main message, 5 action closeD includes the components Date, To, From and SubjectE states the main idea of the memo in less than ten wordsKey1d2e3a4b5c

Identify the elements in this internal memo

MemorandumTo: All members of the legal staff of the Mergers & Acquisitions departmentFrom: John ThorntonDate: 10 February 2006Subject: In-company seminar on contract negotiationsMemoAs part of our in-company training programme focusing on professional communication skills, we have arranged for the well-known communication trainer and practising lawyer, Mr Tom Boland, to hold a half-day workshop on the topic of Successful Contract Negotiations.We would like to invite all members of the legal staff in the department to attend this workshop, which will take place on 27 February, 9-11.30 a.m., Conference Room 12.MemoThe workshop consists of a theoretical part, followed by practical role-plays offering an opportunity for negotiating skills training and personal feedback from the trainer. Thus it is imperative that you arrange your schedules so that you can be present for the entire workshop.Please let me know by 9 a.m. on Monday, 13 February by email (j.thornton@lawfirm.com) whether you can attend.J. ThorntonKey1. The To, From and Date lines2 Subject: In-company seminar on contract negotiations3 Paragraph 1 (As part of)4 Paragraphs 2 (We would like) and 3 (The workshop consists) NB There are 4 main points: the invitation, the time and place, the content and the need to attend5 Paragraph 4 (Please let me know)AssignmentTurn this memo into a template for similar memos. To do this, you should first underline all the useful expressions which could be used in other memos. You should then decide what information needs to go between the underlined sectionsThe trick to successful writing is to copy useful phrases from similar pieces of writing, in the same way as a contract uses a templateE-contractsWhat do you know about e-contracts? Are they used often in your jurisdiction?Complete the spaces (1-5) using these sentences:A) Consumer advocates are concerned because the federal electronic signature law does not define an electronic signature or stipulate what technologies can or should be used to create an electronic signatureB) An electeronic contract is an agreement created and signed in electronic form.C) The law also benefits business-to-business websites who need enforceable agreements for ordering supplies and services. For all of these companies, the new law is essential legislation because it helps them conduct business entirely on the Internet.Complete the spaces (1-5) using these sentencesD) Security experts currently favour the cryptographic signature method known as Public Key Infrastructure (PKI) as the most secure and reliable method of signing contracts online.E) the notice must also indicate whether your consent applies only to the particular transaction at hand, or whether the business has to get consent to use e-documents/signatures for each transaction.New law makes e-signatures validContracts created online are now as legal as those on paperWhile contract basics generally apply to any contract, regardless of form, there are some new and emerging rules that apply specifically to contracts created online. Thanks to federal legislation recently signed into law, electronic contracts and electronic signatures are just as legal and enforceable as traditional paper contracts signed in ink. The law, known as the Electronic Signatures in Global and International Commerce Act, removes the uncertainty that previously accompanied e-contracts. However, consumer groups worry that the law doesnt adequately protect against online fraud and may create disadvantages and penalties for consumers who prefer printed agreements.What are electronic contracts and electronic signatures?1)___An e-contract can also be a Click to Agree contract, commonly used with downloaded software; the user clicks an I Agree button on a page containing the terms of the software license before the transaction can be completed.What are electronic contracts and electronic signatures?One of the more difficult electronic contract issues has been whether agreements made in a purely online environment were signed and therefore legally binding. Since a traditional ink signature isnt possible on an electronic contract, people have used several different ways to indicate their electronic signatures, including typing the signers name into the signature area, pasting in a scanned version of the signers signature, clicking an I Accept button, or using cryptographic scrambling technology. While the term Digital signature is used for any of these methods, it is becoming standard to reserve the term for cryptographic signature methods, and to use electronic signature for other paperless signature methods.Are e-signatures secure?2)___ PKI uses an algorithm to encrypt online documents so that they will be accessible only to authorized parties. The parties have keys to read and sign the document, thus ensuring that no one else will be able to sign fraudulently. Though its standards are still evolving, it is expected that PKI technology will become widely accepted.No paper neededThe most significant legal effect of the new e-signature law is to make electronic contracts and signatures as legally valid as paper contracts. The fact that electronic contracts have been given solid legal support is great news for companies that conduct business online. Under the law, consumers can now buy almost any goods or services-from cars to home mortgages without placing pen to paper. 3)___Federal law versus state lawThe federal electronic signature law wont override any state laws on electronic transactions provided the state law is substantially similar to the federal law or the state has adopted the Uniform Electronic Transactions Act (UETA). This ensures that electronic contracts and electronic signatures will be valid in all states, regardless of where the parties live or where the contract is executed.Do you want paper or electronic?If you prefer paper, the law provides a means for you to opt out of using electronic contracts. An online company must provide a notice indicating whether paper contracts are available and informing you that if you give your consent to use electronic documents, you can later change your mind. If you withdraw consent to use electronic contracts, the notice must explain what fees or penalties might apply if the company must use paper agreements for the transaction. 4)____Do you want paper or electronic?Prior to obtaining your consent, the business must also provide a statement outlining the hardware and software requirements to read and save the businesss electronic documents. If the hardware or software requirements change while you have a contractual relationship with the business, the business must notify you of the change and give you the option to revoke your consent to using electronic documents.Do you want paper or electronic?Although the e-signature law doesnt force consumers to accept electronic documents from businesses, it poses a potential disadvantage for low-tech citizens by allowing businesses to collect additional fees from those who opt for paper.Consumer concerns5)____The law establishes only that electronic signatures in all their forms qualify as signatures in the legal sense, and leaves it up to software companies and the free market to establish which electronic signature methods will be used.Consumer concernsSince electronic- signatures technology is still evolving, many kinds of e-signatures offer little, if any, security. If a consumer uses an insecure signature method, identity thieves could intercept it online and use it for fraudulent purposes. It is expected that secure methods of electronic signatures will be adopted and become as commonplace as credit cards. However, stolen electronic signatures have the potential to become as widespread a problem for e-commerce as credit-card scams and stolen passwords. Consumer-protection groups suggest caution before signing anything online.Questions1. What is the difference between a digital signature and an electronic signature?2. What is the most important result of the new law?3. Why do business-to-business websites welcome the new law?4. What does the new law stipulate concerning the use of paper contracts?5. According to the law, which kinds of electronic signatures are to be regarded as legal signatures?AssignmentAdvantages of new lawDisadvantages of new lawAnswer:Why do you think the drafters of the law left electronic signature undefined? Is this an advantage or disadvantage?What is the status of electronic contracts in your own jurisdiction?Match these words with their synonyms1 revokeA additional fees2 preferB inform3 enforceableC get4 penaltiesD opt for5 obtainE valid6 notifyF withdraw