Practising Comparative Legal English - UniBG Comparative Legal... · Intention to create legal...

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Avv. Serena de Palma

COMPARATIVE LEGAL ENGLISH COURSE

A.A. 2013-14

PRACTISING LEGAL ENGLISH – EXERCISES SEPTEMBER – DECEMBER 2013

Lesson 23rd

Sept.

Exercise n.1. Please match each phrase (1-15) to its function:

A expressing agreement

D expressing disagreement

O expressing an opinion

S giving suggestions

and any combination thereof (ex: A+O/S or D+O/S)

1. I totally disagree.

2. In light of the above, I strongly advise you not to take any further action.

3. In my view, you have an argument but your chances are slim.

4. I completely agree with you on this subject. Therefore, I recommend that a notice be sent to the

board.

5. I suppose it could be true, but I still feel that you should avoid any contact with the other party.

6. I do not entirely agree with you, Harris. We have good chances to succeed in this lawsuit.

7. You’re absolutely right.

8. I see your point, but I believe you probably didn’t consider the risks of entering into this

agreement.

9. I think you should be patient until we attend the next hearing.

10. That may be true, but I still suggest you be careful about your business.

11. Marian is right, we should have a look at what the law says.

12. I couldn’t agree more!

13. I’m afraid this is out of the question.

14. I strongly suggest you get some legal advice on this issue.

15. Mark’s lawyer believes that we’ll soon have to bring this matter before the court.

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Exercise n.2. Please fill in the gaps using the terms and expressions hereunder. You might have

to use them more than once. This is an excerpt from ILEC book (International Legal English

Certificate, Cambridge University Press, 2006).

change missing clause objections practice

conditions agreement provision

It’s common to start negotiations with an existing contract template, which gives you a kind of

blueprint of the things that are usually included in such an ___________. It’s important to realise

that negotiating with a contract template means that it is necessary to review the terms and

___________ it contains carefully. You have to consider what is not in the agreement but should

be, that is, what’s ___________ and should be added.

It’s good ___________ to separate the issues at stake into different categories in your mind: things

you can’t possibly accept, major points and minor points. Then you make trades with the other

side, one item for another. This is also known as “horse trading” and works like this: “I’ll

___________ this provision to what you want if you agree to add the ___________ that I want”.

Next point deals with overcoming some of the ___________ you’ll commonly hear in a

negotiation. Sometimes the other party will object to removing a clause that you don’t want by

saying something like: “Don’t worry, we won’t hold you to that item, so we’ll just leave it in”. In

such a case, you should insist that the item’s taken out.

Almost all agreements contain a merger ___________ which states that anything that was said or

written before the ___________ was signed does not matter, unless it’s explicitly written in the

agreement.

Exercise n. 3. Definitions. Choose the correct definition for each of the following terms:

1. Contract

A promise to do or not to do something

A legally binding agreement

2. Right

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A legal claim that a person will or will not do a certain action

Liability for the breach of a contractual obligation

3. Obligation

The right to recover damages

A legal duty to do or not do something

4. To bind

To legally obligate a person to comply with certain provisions

To enforce a right against someone

Exercise n. 4. Focus on key terms in contracts

“Agreement” and “contract” are commonly considered as synonyms but they are not. In fact, an

agreement is an understanding between two or more parties on certain objects or performance of

actions and can also not be binding. By contrast, a contract, if valid, is always binding upon the

parties.

“Obligation” and “liability” are not synonyms: an obligation is a legal duty to behave in a certain

way, whereas a liability is an obligation arising from a tort or a breach of contract.

“Acceptance” and “consent” are synonyms when they relate to the intention of the offeree to

accept the terms and conditions of the offer.

“To stipulate a contract” and “To enter into a contract” are synonyms: they both refer to the

actual coming into force of the contract.

Are they synonyms?

Choose which of the following terms are synonyms.

1. “Agreement” and “Contract”: yes no

2. “Offer” and “Proposal”: yes no

3. “Acceptance” and “Consent”: yes no

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4. “To stipulate a contract” and “To enter into a contract”: yes no

5. “To agree on a contract” and “To form a contract”: yes no

Exercise n. 5 Reading. U.K. law on contract formation.

Intention to create legal relations. Under the English law, the general rule is that the intention of

the parties is to be assessed objectively.

An offer is a statement by one party of a willingness to enter into a contract on stated terms,

provided that these terms are, in turns, accepted by the party to whom the offer is addressed. A

purported acceptance which does not accept all the terms of the original offer is not in fact a true

acceptance at all but is a counter-offer which “kills off” the original offer and amounts to a new

offer which can in turn be accepted by the other party: this approach is known as “mirror image

rule” and is the general rule followed by English courts. According to this rule, the court must be

able to find in the documents which passed between the parties a clear and unequivocal offer

which is matched or “mirrored” by an equally clear and unequivocal acceptance.

Please describe briefly the mirror image rule under the U.K. law.

***

Lessons 14th

and 21st

October

CONTRACT FORMATION

Exercise 1

1. An agreement may be entered ____ between two or more parties

a. By

b. Into

c. In

2. A valid contract is binding ___ the parties

a. To

b. For

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c. Upon

3. The effective date is the date on ____ the contract comes into force

a. That

b. Which

c. When

4. An offer may be accepted or ______

a. Objected

b. Revoked

c. Rejected

5. The acceptance can be made ___ conduct

a. With

b. In

c. By

6. A void contract has no ___ effects

a. Valid

b. Legal

c. Conditional

7. A contract may be subject ___ conditions

a. To

b. Upon

c. For

Exercise 2

1. The parties entered into a valid and binding ___

a. Agreement

b. Promise

c. Arrangement

2. One party is contractually _____ to perform his/her obligations

a. Enforced

b. Bound

c. Liable

3. The party is entitled ____ contractual damages

a. For

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b. To

c. Of

4. The court ruled that the contract had to be ______ as void

a. Awarded

b. Maintained

c. Considered

5. Each party has to perform his/her _____ obligations

a. Individual

b. Valid

c. Contractual

6. A voidable contract produces ____ effects until annulled

a. Legal

b. Mutual

c. Material

7. The parties agreed ___ all the contractual terms and conditions

a. On

b. With

c. Of

Exercise 3

1. The parties to a contract must have the intention to be ____ bound.

a. Fairly

b. Totally

c. Legally

2. The offer should contain sufficiently definite ____.

a. Terms

b. Information

c. Amounts

3. An offer may be revoked ____ its acceptance.

a. After

b. Before

c. Unless

4. No contract is formed if the offer is ____.

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a. Accepted

b. Rejected

c. Submitted

5. Generally, the contract is concluded ____ the acceptance reaches the offeror.

a. That

b. Which

c. When

6. Negotiation of contract is carried ___ by the parties.

a. Out

b. In

c. For

7. The parties signed the contract after having discussed its ____.

a. Acceptance

b. Terms

c. Offer

Exercise 4. Grammar (prepositions and articles)

1. The parties signed ___ contract today.

a. An

b. One

c. The

2. ___ lawyer advised the client on the contract

a. The

b. A

c. Each

3. ___ parties met to negotiate the contract

a. each

b. A

c. The

4. The parties ___ this agreement agreed on certain terms and conditions.

a. To

b. Of

c. In

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5. The price list is set out ___ Attachment 1.

a. As

b. In

c. With

6. This is a non binding arrangement ___ the parties.

a. By

b. To

c. Between

7. This is the effective date ___ the contract.

a. Of

b. For

c. To

Exercise. Certainty of terms in contracts: a case study

Read the following case study relating to the certainty of terms in contracts.

In Carlill v Carbolic Smoke Ball Co (U.K., 1893), the company placed advertisements in a number of

newspapers, declaring that it would pay £ 100 to anyone who caught the flu after using its smoke

balls according to the product instructions. The company further stated that it had deposited £

1.000 at the Alliance Bank as a guarantee against any possible claims. Mrs Carlill bought one

smoke ball, used it as indicated in the instructions, but still caught the flu. She claimed the sum of

£ 100 stated in the advertisement but the company refused to pay her. Mrs Carlill then sued the

company, which argued that the advertisement was too vague to be considered a contract. The

court eventually held that the product instructions were sufficiently clear and defined to

constitute the terms of a contract and that the reference to the £ 1000 deposit was evidence

enough of the company’s intention to be bound. The court concluded, therefore, that Mrs Carlill

was entitled to recover the £ 100 stated in the advertisement.

Mark “true” or “false” for the following sentences.

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1. Carbolic Smoke Ball Co advertised its smoke balls as a product which would prevent people

from catching the flu.

2. Mrs Carlill bought a smoke ball but did not follow the instructions for their use.

3. Carbolic Smoke Ball Co had provided a bank deposit of £ 1000 as a security for the reliability of

its smoke balls.

4. Mrs Carlill was awarded £ 100 by the Carbolic Smoke Ball Co because she had caught the flu

despite having used the smoke ball.

5. Carbolic Smoke Ball Co argued that its advertisement on the smoke balls was too vague to be

considered a contract.

6. The court held that Mrs Carlill was not entitled to the sum of £ 100 since the advertisement was

too vague to be considered a contract.

Exercise. Please fill in the gaps by choosing the proper term/expression. You might have to use

some terms more than once.

acceptance legal consideration valid capacity

offer negotiation(s) rejection revocation counter-

offer value formality

A contract requires an ________ to be made by one of the parties, and to be accepted by the

other party. The ________ must be unconditional, that is to say that it must not in any way alter

the terms of the ________. If it does so, it will not constitute an acceptance, but will be construed

as a ________ of the offer, and as the making of a ________ .

To revoke or withdraw an offer, notice of ________ must be communicated to the person who has

received the offer. The parties must have ________ to contract, and the objects of the contract

must be ________.

The parties must conduct their________ in such a way as to be shown to have the intention to

create ________ relations.

A further requirement is that each party must provide ________ for the promise by the other. This

means that a party must furnish some ________ to the other party. Additionally, some contracts

may require ________ .

Contracts for sale or other disposition of land must be evidenced in writing to be ________.

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Exercise. Give the correct abstract noun for the following verbs.

Example: to stipulate � stipulation

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1. To propose

2. To negotiate

3. To execute

4. To amend

5. To perform

6. To accept

7. To promise

8. To expire

9. To change

10. To draft

11. To waive

12. To indemnify

13. To warrant

14. To apply

15. To supply

16. To pay

17. To disclose

18. To license

19. To provide

20. To settle

Lesson 31st

October

Exercise n. 1

Express and implied terms

Commercial contracts should contain terms about delivery or completion of work. It is possible to imply

certain terms, but to avoid misunderstandings the parties should make their intentions clear by providing

express terms. Certain types of contracts, however, contain implied terms provided by the law or by

judicial decisions. Generally, in contracts for the sale of goods, merchantability of goods and absence of

defects in workmanship and materials are implied terms by operation of law. Such terms are often implied

in contracts to ensure a minimum degree of protection for the parties to the contract.

Select the correct answer by marking “true” or “false”.

1. Contractual provisions must be express to be valid.

2. In contracts certain terms may be implied by the law or by judicial decisions.

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3. Generally, in contracts for the sale of goods there is no warranty on the merchantability of the goods.

4. Some contractual terms are implied by operation of law in order to ensure a better protection for the

parties to the contract.

Exercise n. 2.

Term

When the parties enter into a contract they generally provide a clause, named ‘term’ or ‘duration’, which

states the effective date and the expiry date of the contractual relationship. The effective date is the date

on which the contract comes into force. The date of signature is the date on which the parties actually sign

the contract. The expiry date is the date agreed by the parties for the contract to cease being effective. The

expiry date is commonly (and incorrectly) referred to as ‘termination date’.

Reading

Margaret is a qualified lawyer and John is a trainee. They work in the same law firm.

John: Hi Margaret, do you have a minute? I need some advice on this contract.

Margaret: Sure. Tell me.

John: Well, the parties entered into this agency agreement and they provided a “term and termination”

clause, whereby the contract will come into force on 31 December 2010 and expire on 30 June 2012.

Margaret: Okay.

John: But they actually signed the contract on 15 November 2010.

Margaret: That’s correct, though the effective date of the contract is the date provided in the “term and

termination” clause, which is 31 December 2010. The contract will come into force at that date, whereas

15 November is the date of signature. On this date the contract is valid, since it has met all the legal

requirements provided by the law, but it’s not effective yet.

John: I see. So, the effective date and the date of signature do not always have to match.

Margaret: Not necessarily, it depends on the parties’ agreement.

John: And what about the expiry date? Will the contract last until then?

Margaret: If the parties do not breach the contractual obligations and no event of termination occurs, then

the contract will cease to be effective as from the expiry date agreed in the “term and termination” clause.

John: Okay, it’s all clear now. Thanks so much, Margaret.

Margaret: You’re welcome John.


1. John is a qualified lawyer

2. John asks Margaret to clarify some provisions of a contract

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3. The contract provides a “term and termination” clause

4. The contract provides a date of entry into force and an expiry date for the contractual relationship

5. In the contract, the effective date matches with the date of signature

6. The effective date is the date on which the contract comes into force

7. The date of signature is the date on which the parties sign the contract

8. The expiry date is the date on which a contract terminates because a breach of contract has occurred

Exercise n.3. Exclusion/limitation of liability clauses

Read the following liability clause. Fill in the gaps by selecting the correct terms and expressions.

“Save as otherwise expressly _______ in this agreement, the Seller any hereby expressly excludes any and

all _______ to the Buyer arising out of or in connection with this _______ of whatsoever to the fullest

extent permitted by _______.”

liability agreement law provided

Remedies to breach of contract

A contract gives rise to legal rights and obligations; the non-performance or the non compliant

performance of contractual obligations shall result in a breach of contract and give rise to a contractual

liability of the breaching party. Liability may be limited or excluded by way of exclusion or limitation of

liability clauses.

When a breach of contract occurs, the non-breaching party may be entitled to contractual remedies, such

as penalty, liquidated damages, contract termination.

Exercise 4: definitions

Choose the correct definitions

1. Breach of contract:

The extinction of the contractual obligations

A default by one party in performing its contractual obligations

2. Breaching party:

The party in breach of contract

The party who terminated the contract

3. Obligation:

The duty to do or not do something

Compliance with the law

4. Contractual liability:

The responsibility arising from a breach of contract

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The duty to fulfill the contractual obligations

Contractual liability

A breach of contract gives rise to contractual liability of the breaching party. A breach of contract may arise

from the omission or non-performance of contractual obligations. For example, if Seller fails to deliver the

goods to Buyer under a supply contract, Seller will be liable for breach of contract.

In addition, a breach of contract may also concern a non-compliant performance, such as a late

performance. For example, if Seller delays in delivering the goods to Buyer, Seller has breached the

contract.

Exercise: a breach of contractual obligations

Telephone conversation between Mrs Lawrence, the legal counsel of Blue Star S.p.a. and Mrs Cleaver,

the legal counsel of Megale A.E.. Blue Star and Megale entered into a supply contract under which Blue

Star commits to sell some products to Megale under certain terms and conditions. Megale claims that

the products sold do not comply with the quality standards agreed in the contract.

Mrs Lawrence: Hello Mrs Cleaver, how are you?

Mrs Cleaver: Fine thanks. And you?

Mrs Lawrence: Fine. As you know, I’m calling to discuss about the alleged breach of contract claimed by

your client.

Mrs Cleaver: Yes, sure. Actually, we have ascertained that the products supplied by you were defective and

not fully compliant with the description provided in the contract.

Mrs Lawrence: Yes, so I’ve heard. However, as far as I know, our expert came to your facilities two weeks

ago and did not discover any non compliance or defect whatsoever!

Mrs Cleaver: Yes, but our expert is of a different opinion. At this point, I would suggest that our respective

experts meet and discuss the matter more in detail.

Mrs Lawrence: All right, then. I’ll speak with my client and let you know. And then…what about payments?

Your client did not pay the invoiced price for the products.

Mrs Cleaver: Since there is a claim on the quality of products, my client decided to postpone payments

until the claim is settled.

Mrs Lawrence: I see your point, but I must refer to clause 3 of the supply contract, which provides that

payments are due and payable notwithstanding any claim between the parties.

Mrs Cleaver: Ok, I think we should arrange a meeting to discuss the outstanding issues.

Mrs Lawrence: I fully agree.

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Exercise: true or false.

1. Blue Star and Megale entered into a supply contract.

2. Mrs Cleaver is the legal counsel of the buyer.

3. The buyer claims that the quality of products does not comply with the contractual provisions.

4. The seller’s expert assessed that the product were defective.

5. The buyer did not pay for the allegedly defective products.

6. The Seller acknowledges that the products sold were defective.

7. Mrs Cleaver suggests that the parties meet to settle the dispute.

Exclusion or limitation of liability in contracts: a case study

Read the following case study relating to exclusion or limitation of liability in contracts.

In Croudace Construction Ltd v Cawoods Concrete Products Ltd (U.K. 1978), the dispute was about a supply

agreement and an alleged breach of contract. Croudace Construction Ltd - buyer - claimed damages arising

from the late delivery of blocks by Cawoods Concrete Products Ltd – seller. Due to this delay, the buyer

had to incur extra costs for its subcontractors and claimed reimbursement of these amounts from seller.

The latter argued that there should be no liability on its part, because a clause in the agreement excluded

the seller’s liability for consequential loss. The Court of Appeal held that, due to the uncertainty of the

meaning of “consequential loss” in the contractual clause, the seller had not excluded liability for the kind

of loss incurred by the buyer in this case.

Exercise: true or false


1. In Croudace Construction Ltd v Cawoods Concrete Products Ltd, the contract stated that the seller was

not liable for consequential loss incurred by the buyer.

2. The contract stated expressly that in case of consequential loss due to the seller’s fault, the buyer was

entitled to terminate the contract.

3. The seller made a late delivery of blocks to the buyer.

4. The buyer brought a claim against the seller alleging that he had incurred in extra costs for its

subcontractors due to the seller’s delay.

5. The seller acknowledged his liability for breach of contract and compensated the buyer for the loss

incurred.

6 The court held that the buyer was not entitled to damages since the seller had excluded its liability for

consequential loss in the contract.

***

Exercise n. 1. Correspondence lawyer – client

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English client willing to buy a house in Italy

English lawyer working for an Italian law firm, together with Italian colleagues

Dear Dr Smith,

Thank you for your email and I trust you're well.

As mentioned when we last spoke, I've recently set up practice in Italy together with an Italian lawyer –

Sara Rossi - specialized in international contracts lawyers and a tax and accounting consultant – Miriam

Scotti. Each of the co-founders have about 15 years of experience in our respective areas of expertise and

attached in a detailed profile of our professional backgrounds.

If you are happy for us to act for you, I think it best that my colleague, Sara, handles your property

purchase transaction and the negotiations leading up to it. Sara has experience in these matters and if you

are fine with this I will write to the real estate agent and inform him accordingly. I will also arrange for Sara

to give you a fee estimate for the likely work involved.

I am also copying in Miriam my tax colleague, in the event that there are any tax matters to be watchful

for. I remember you mentioned that you have another property in Como which you purchased previously.

Therefore you should already have a tax code I expect, but please confirm and let us have it.

Will Mrs Smith also be joint purchaser and owner of the property? If yes, we will need her tax code too.

We will also need copies of your ID document, namely your passports.

In the real estate agency’s proposal - "Proposta Irrevocabile di Acquisto", there was no mention of the sale

price. Attached is the document (in Italian) I received from the agency in Dec 2011.

Do let me know if you are able to meet with Sara and myself early this week for the signing of the

documents and payment of the deposit.

Best regards

Louise

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True or false?

1. Louise and Sara recently set up a law firm

2. Miriam is an accountant and also part of the law firm

3. Mr Smith is interested in buying a property in Italy

4. Sara writes to Mr Smith to assist him in the purchasing of the property

5. Louise is available to provide legal assistance to Mr Smith for the purchasing of the property

6. The Italian Proposta Irrevocabile di Acquisto has been drafted by Louise

7. Price of the property has been agreed between the parties

Termination clause in contracts

A “termination clause” usually regulates how a contract can be brought to an end before its expiry date.

Generally, a termination clause can be enforced in the event of a breach of contract.

The parties to a contract may set forth two different types of termination clauses:

1. Termination by notice.

Each party may terminate the contract by sending a prior written notice of termination to the other party.

No breach of contract has occurred, nevertheless each party is free to terminate the contract at any time.

2. Termination by default.

If a breach occurs, the non-breaching party may terminate the contract. Generally, a letter of termination

is sent to permit the breaching party to remedy the breach within a given period of time. Failure to remedy

the breach eventually leads to contract termination.

Exercise n. 2: true or false


1. A contract is terminated when it is brought to an end before its expiry date.

2. A notice of termination is a communication relating to the payment of the contract price.

3. Termination by notice involves the breach of one or more contractual obligations.

4. Termination by default occurs when the parties agree to terminate the contract by mutual consent.

Frustration of contract

Frustration of contract occurs when performance of contractual obligations is impossible for some

unforeseeable event beyond the party’s control which prevents it from fulfilling its obligations. The legal

consequence of this situation is that the non-performing party will not be liable for breach of contract.

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Exercise n. 3: Fill in the gaps

Read the following paragraph. Fill in the blanks by selecting the correct terms and expressions below.

“Until the last century, the _____ was that the parties were under an absolute duty to perform their

contractual _____. Starting with the case Taylor v Caldwell (1863), the _____ recognized an exception to

the rule about absolute contract under the doctrine of _____: if further performance of the contract is

prevented because of events beyond the _____ of the parties, the contract is _____ and the parties

discharged from their obligations.”

court terminated obligations rule

control frustration

Exercise n.4 Fill in the gaps

TERMINATION CLAUSE

“Either Party shall have the right to terminate this Agreement if the other Party commits a material breach

of any of its undertakings under this Agreement, provided that prior to the termination hereof the non-

defaulting Party shall notify the other Party of the default in writing, stating a reasonable time – in any

event not exceeding 30 (thirty) calendar days from the date the notice is received- within which the

defaulting Party shall have to remedy said default.”

obligations pursuant to default be entitled to contract

providing non-breaching cure

Exercise n. 5 Read the following expressions and complete them by choosing between the options given

below.

1. The contract may be signed in any number of counterparts, each of which when so executed

(a) shall be deemed to be an original

(b) shall be void and of no effect

2. Once the parties have entered into the contract, they can change its provisions by

(a) registering it according to the applicable laws

(b) signing an amendment to the contract

3. A binding contract has to be performed by the parties

(a) in compliance with its terms and conditions

(b) subject to the approval by both parties

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4. If one party does not have the ability to enter into a contract

(a) that party will not be bound by its terms and conditions

(b) a third party will perform the contract

Exercise n. 6 Please fill in the gaps in the following letter of termination.

Dear Sirs,

This letter refers to the Sale Agreement between you, BROWNEYE Plc (the “Seller”) and my client,

BIGTREE Ltd (the “Buyer”), dated September 15, 2008. The _______ of the said agreement is the sale of

machinery to be used by the Buyer at its plant in Sicily.

At the beginning of 2008, the machinery broke down and the Seller did not _____ _____ its obligation

to repair it, according to Clause 16 of the Sale Agreement.

Despite repeated _______ on the part of our client to repair the machinery, the Seller has to this date

not performed its obligations, which constitutes a ______ ______ of the Sale Agreement as defined in

Section [*] of the Sale of Goods Act.

Therefore, by this _______ you are requested to fulfill the contractual _______ under Clause 16

aforementioned, within one (1) month of receipt of this notice.

Should the aforementioned obligations not be fulfilled within the term stated, the Sale Agreement shall

be deemed _______ according to Section [*] of the Sale of Goods Act.

Furthermore, our client reserves the right to bring a _______ against you to recover _______ caused by

this substantial breach of contractual obligations as referred to hereabove.

I look forward to receiving your comments on the above.

Yours faithfully,

P. Stern

Lawsuit Requests Damages terminated notice

Comply with Substantial Breach Object Obligation

***

Exercise n. 1. Breach of representations and warranties

Recently, the courts seem to have shifted to a more flexible, pro-business interpretation. In one decision,

the Supreme Court heard a claim made by a buyer for a seller's defective performance in selling an

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ownership interest in a limited liability company. The buyer claimed that the seller misrepresented the

company's financial status, as it turned out after closing that the company had debts which were not

disclosed to the buyer, together with some other financial information. The Supreme Court held that

nothing prevents the parties to a share purchase agreement from agreeing on certain qualities or

characteristics of the underlying company. If it is proven that the company does not have these qualities,

this is a defect not only of the company, but also of the shares, for which the seller is liable. The Supreme

Court thus confirmed fairly clearly that a breach of representations and warranties regarding the company

can be considered a defect in the shares and, in the absence of any particular contractual provision, the

general doctrine of liability for defects will come into play. This decision can be viewed as a positive shift

on the subject and may help to address any potential concerns from investors (and their lawyers) as to the

level of protection they enjoy before the court in complicated acquisition deals.

True or false? Mark “true” or “false” for the following sentences.

1. The courts have recently changed their interpretation of the representations and warranties

clauses in share purchase agreements.

2. In the case heard by the Supreme Court, the seller brought a lawsuit against the buyer for breach of

contract.

3. A limited liability company is a corporation where liability of members is limited to their

contribution to the company.

4. It was argued that the plaintiff had not disclosed the company’s true and correct financial situation.

5. After closing, the plaintiff found out that some of the company’s debts had not been disclosed by

the defendant.

6. The Court held that the parties are free to agree on certain qualities of the underlying company.

7. The Court did not consider the breach of representations and warranties as a violation of the

contractual obligations.

8. According to the Court’s decision, a defect in the shares is equivalent to any other defect which

may affect the underlying company.

9. The Court eventually ruled in favour of the seller.

10. The Court’s decision can be viewed as a precedent in favour of the buyer’s position in share

acquisition deals.

Exercise n.2. Give the correct abstract noun for the following verbs.

1. To breach ______________________

2. To fail ______________________

3. To settle ______________________

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4. To terminate ______________________

5. To decide ______________________

6. To purchase ______________________

7. To sell ______________________

8. To license ______________________

9. To remedy ______________________

10. To deliver ______________________

11. To claim ______________________

12. To attach ______________________

13. To sign ______________________

14. To state ______________________

15. To issue ______________________

16. To guarantee ______________________

17. To inform ______________________

18. To warn ______________________

19. To commit ______________________

20. To transfer ______________________

Exercise n.3 Judicial remedies

In the event the dispute is brought before a court, once it is established that the contract was entered into

and breached, the court will enforce it by giving a remedy for the breach. Generally, the primary remedy

for breach of contract is a judgment awarding damages to the non-breaching party, whereas an order for

specific enforcement of the promise is available only in exceptional circumstances.

Choose the correct word from those suggested below to complete the following sentences.

1. To enforce a contractual _______

2. To breach a _______

3. To remedy a _______

4. To claim for _______

5. To bring a dispute before a _______

6. To _______ a right

7. _______ is a contractual remedy for breach of contract

22

breach clause contract court enforce

termination damages

Exercise n.4. A force-majeure clause

A force-majeure clause is aimed to protect the parties against failure to perform one or more contractual

obligations because of some unavoidable and unforeseeable events, such as natural disasters or wars,

generally named “acts of God”. The clause states that the party affected by the force-majeure event will

not be liable for failure to perform its obligations. The parties may, alternatively, provide that in case an

event of force-majeure occurs, the contract will be terminated immediately or after a given period of time

should the party’s performance of contract still be restrained or impeded by the force-majeure event.

Conversation

Mr Taylor: Hi Jane, how are you?

Mrs Lawrence: Hi David, fine thanks, and you?

Mr Taylor: I’m worried about a claim. Do you remember Northwell Inc., our customer in North Carolina?

Mrs Lawrence: Yes, sure. We sold our machinery to Northwell last year. I remember that.

Mr Taylor: Right. Northwell bought our machinery which broke down before the expiry of the guarantee

period. Apparently, it can’t be repaired and should be replaced.

Mrs Lawrence: Right.

Mr Taylor: The problem here is that the production of that machinery was transferred to White Moon Inc.

last year, so it’s impossible for us now to replace it.

Mrs Lawrence: Still, I’m afraid we have to, considering that the contract for the sale of machinery sets forth

our obligation to repair or replace the product sold in case of defects or malfunctioning.

Mr Taylor: That’s true, but the contract also provides a force-majeure clause. Do you think we can invoke

the application of such a clause? Actually, we are not in that business anymore…and so, it’s impossible for

us to replace the machinery!

Mrs Lawrence: I see your point David, but I’m afraid this is not the matter in this case. A force-majeure

clause applies only in case of unpredictable events that actually prevent the parties from performing their

obligations. In my view, a machinery breakdown cannot be considered an unpredictable event. In fact, we

provided it in the contract and we guaranteed a contractual remedy for such an event.

Mr Taylor: I see your point. You’re right. We have to comply with the guarantee provisions set forth in the

contract.

Mrs Lawrence: I think so. I do not believe that a force-majeure clause can be invoked in this case.


1. Mrs Lawrence is a legal counsel for Blue Star.

23

2. Mr Taylor asks Mrs Lawrence for some advice on a claim.

3. Northwell Inc. sold some machinery to Blue Star.

4. The contract for the sale of the machinery does not provide any remedy in case of machinery

breakdown.

5. Blue Star was committed to repair or replace the defective machinery under the contract.

6. Mr Taylor would like to invoke a force-majeure clause to avoid the machinery replacement.

7. Mrs Lawrence believes that a force-majeure clause can be invoked in this case.

Exercise n. 5. Force-majeure clause

Read the following force-majeure clause.

“No failure, omission or delay of either Party in the performance of any obligation of this Agreement shall be

deemed a breach of this Agreement nor create any liability hereunder, if the failure, omission or delay shall

arise from acts of God, laws, rules, regulations or orders of any governmental authority, floods, fires,

explosions, storms, earthquakes, acts of war (declared or undeclared), rebellion, insurrections, riot, sabotage,

shortages of fuel, power, energy resources, and/or raw material, invasion, epidemic, quarantine, accident,

strikes, lockouts, labor disputes, or any other comparable cause beyond the reasonable control of the Party

concerned.”


1 Force-majeure clauses provide that the parties have to perform the contract also in case a force-majeure

event occurs.

2 Force-majeure clauses generally exclude liability of the party affected by the force-majeure event.

3 Generally, a force-majeure event is foreseeable by the party.

4 The failure or the omission to perform will constitute a breach of contract in case a force-majeure event

occurs.

5 The force-majeure clause concerns events which are under the party’s control.

Exercise n. 6. Please fill in the gaps in the paragraph below.

In Taylor v Caldwell (U.K. 1863), Taylor, the claimant, had rented the Surrey Gardens and Music Hall for a

series of concerts. However, after ___________ the agreement and before the date of the first

performance, the hall was completely destroyed by fire. The ___________ sued Caldwell claiming that the

___________ had been breached. Caldwell objected that the burning down of the music hall was an

___________ event which actually prevented both parties from performing the contract. It was finally held

by the ___________ that the contract was frustrated by the occurrence of events beyond the parties’

control and that the parties had to be discharged from their contractual ___________.

24

unforeseeable court claimant

contract signing obligations

***

Exercise n. 1

Please complete each sentence by choosing the correct option (a or b)

1. Enterprises are managed by

a. employees

b. entrepreuners

2. An incorporated company is

a. a government agency

b. a legal person distinct from its members

3. A partnership is formed by

a. shareholders

b. partners

4. A limited liability company

a. is not a legal person

b. is a legal person

5. A company is

a. a corporation with the purpose of profit

b. a corporation formed to pursue charitable purposes

6. Partnerships are formed by

a. by two or more persons to carry out a business together

b. by two or more people to carry out a business together

7. Directors

a. Invest money in buying the company’s shares

b. carry out the company’s business

8. Partners are

a. liable severally and jointly

b. liable up to the amount they contributed in the partnership

9. A capital contribution is

a. a document signed by the company members

b. the amount of money paid by a person to become a company member

25

10. Limited liability of members is a legal consequence of

a. the legal personality of a company

b. the contribution made by the members

Exercise n. 2. Complete this table by filling the correct noun or verb form.

VERB ABSTRACT NOUN PERSONAL NOUN

To administrate Administration Administrative

Liquidation

Audit

To issue

To provide

To direct

Redemptor

Transfer

To chair

To intervene

Promotion

Adviser/or

Investor

Management

To delegate

Exercise n. 3. Please read the letter of advice below.

Dear Mr Brown

Re: Special shareholders meeting of Redcat Inc.

I have now had an opportunity to research the law on this point and I can provide you with the following

advice.

Firstly, to summarise the facts of the case, a group of shareholders of Redcat Inc. has filed an action in the

district court seeking to set aside the election of the board of directors on the grounds that the

shareholders’ meeting at which they were elected was held less than a year after such meeting.

The bylaws of the company state that the annual shareholders’ meeting for the election of directors be

held at such time each year as the board of directors determines, but no later than the fourth Wednesday

in July. In 2010, the meeting was held on July 18th

. At the discretion of the board, in 2011 the meeting was

26

held in March 20th

. The issue in this case is whether the bylaws provide that no election of directors for the

ensuing year can be held unless a full year has passed since the previous annual election meeting.

The law in this jurisdiction requires an ‘annual’ election of the directors for the ensuing ‘year’. However,

we have not found any cases or interpretation of this law which determine the issue of whether the law

precludes the holding of an election until a full year has passed. The statutes give wide leeway to the board

of directors in conducting the affairs of the company. I believe this is unlikely that a court will create such a

restriction where the law has not specifically done so.

However, this matter is complicated somewhat by the fact that there is currently a proxy fight underway in

the company. The shareholders who filed suit are also alleging that the early meeting was part of a

strategy on the part of the directors to obstruct the anticipated proxy contest and to keep these

shareholders from gaining representation on the board of directors. It is possible that the court will take

this into consideration and hold that the purpose in calling an early meeting was to improperly keep

themselves in office. The court might then hold that, despite the fact that no statute or bylaws was

violated, the election is invalid on a general legal theory that the directors have an obligation to act in good

faith. Nevertheless, courts are usually reluctant to second-guess the actions of board of directors or to play

the role of an appellate body for shareholders unhappy with the business decisions of the board. Only

where there is a clear and serious breach of the directors’ duty to act in good faith will a court step in and

overturn the decision. The facts in this case simply do not justify such court action and I therefore conclude

that it is unlikely that the shareholders will prevail.

Read the whole letter and choose the best answer to each of these questions

1 On which grounds did the shareholders file the action?

(a) On the ground of their rights as shareholders

(b) On the grounds of a violation of the bylaws

(c) On the grounds of an ongoing proxy fight

(d) On the grounds of their lack of faith in the board of directors

2 What does the writer identify as the issue of the case?

(a) Whether the annual shareholders’ meeting determines the term of the board of directors

(b) Whether the election of the board of directors requires a quorum

(c) Whether the annual shareholders’ meeting must be held a full year after the last one

(d) Whether the bylaws define the term ‘full year’

3 What does the writer say regarding earlier cases related to this one?

(a) They provide for an analysis in favour of the shareholders

27

(b) They give the board of directors the freedom to run the company as they see fit

(c) They have merely provided an interpretation of the legislative intent

(d) They do not address the issue involved

4 What reason does the writer give for his conclusion?

(a) It is dubious that the shareholders will prevail

(b) The facts of the case do not support judicial intervention

(c) A court of appeal will only look at the facts of the case

(d) The board of directors has a duty to act in good faith

Choose the best explanation for each of those words or phrases from the letter above

1 on the grounds that

(a) In the area of

(b) On the basis of the fact that

(c) Despite the fact that

2 at the discretion of

(a) According to the decision of

(b) Through the act of

(c) Due to the secrecy of

3 the ensuing year

(a) The next year

(b) The present year

(c) The past year

4 statutes give wide leeway

(a) Statutes can easily be avoided

(b) Statutes allow considerable freedom

(c) Statutes restrict extensively

5 alleging

(a) Stating without proof

(b) Making reference to

(c) Proposing

6 to act in good faith

28

(a) To act from a religious belief

(b) To do something with honest intention

(c) To plan for the future carefully

Exercise n. 4. Please match the prepositional phrases with their definitions.

1 in terms of

2 in the course of

3 by way of

4 in response to

A for the purpose of

B as an answer to

C with respect to

D while, during

29

Exercise n. 5. Complete these sentences using the prepositional phrase from exercise 4 which best fits in

each one. For one sentence there is more than one correct answer.

Ex. In the course of choosing the name of the company, a number of matters must be considered.

1 Confidential information acquired ______________________ of one’s directorship shall not be used for

personal advantage.

2 I would advise that members of your project group formalize your relationship

______________________ a partnership agreement.

3 This form of corporation is often considered to be the most flexible body ______________________

corporate structure.

4 Our company formation experts are unable to provide advice ______________________ your query, as

there are a number of factors which need to be taken into account which do not relate directly to this area

of expertise.

5 The relationship between management and board of directors at US multinational companies has been

changed dramatically through a series of corporate governance initiatives begun

______________________ corporate scandals.

6 shareholders and other investors in corporations tend to view corporate governance

______________________ the corporation’s increasing value over time.

7 Regular and extraordinary board meetings may be held by telephone, video- conference and

______________________ written resolutions.

***

Exercise n. 1. Correspondence lawyer – client

English client willing to buy a house in Italy

English lawyer working for an Italian law firm, together with Italian colleagues

Dear Dr Smith,

Thank you for your email and I trust you're well.

As mentioned when we last spoke, I've recently set up practice in Italy together with an Italian lawyer –

Sara Rossi - specialized in international contracts lawyers and a tax and accounting consultant – Miriam

30

Scotti. Each of the co-founders have about 15 years of experience in our respective areas of expertise and

attached in a detailed profile of our professional backgrounds.

If you are happy for us to act for you, I think it best that my colleague, Sara, handles your property

purchase transaction and the negotiations leading up to it. Sara has experience in these matters and if you

are fine with this I will write to the real estate agent and inform him accordingly. I will also arrange for Sara

to give you a fee estimate for the likely work involved.

I am also copying in Miriam my tax colleague, in the event that there are any tax matters to be watchful

for. I remember you mentioned that you have another property in Como which you purchased previously.

Therefore you should already have a tax code I expect, but please confirm and let us have it.

Will Mrs Smith also be joint purchaser and owner of the property? If yes, we will need her tax code too.

We will also need copies of your ID document, namely your passports.

In the real estate agency’s proposal - "Proposta Irrevocabile di Acquisto", there was no mention of the sale

price. Attached is the document (in Italian) I received from the agency in Dec 2011.

Do let me know if you are able to meet with Sara and myself early this week for the signing of the

documents and payment of the deposit.

Best regards

Louise

True or false?

8. Louise and Sara recently set up a law firm

9. Miriam is an accountant and also part of the law firm

10. Mr Smith is interested in buying a property in Italy

11. Sara writes to Mr Smith to assist him in the purchasing of the property

12. Louise is available to provide legal assistance to Mr Smith for the purchasing of the property

13. The Italian Proposta Irrevocabile di Acquisto has been drafted by Louise

14. Price of the property has been agreed between the parties

31

Termination clause in contracts

A “termination clause” usually regulates how a contract can be brought to an end before its expiry date.

Generally, a termination clause can be enforced in the event of a breach of contract.

The parties to a contract may set forth two different types of termination clauses:

1. Termination by notice.

Each party may terminate the contract by sending a prior written notice of termination to the other party.

No breach of contract has occurred, nevertheless each party is free to terminate the contract at any time.

2. Termination by default.

If a breach occurs, the non-breaching party may terminate the contract. Generally, a letter of termination

is sent to permit the breaching party to remedy the breach within a given period of time. Failure to remedy

the breach eventually leads to contract termination.

Exercise n. 2: true or false


1. A contract is terminated when it is brought to an end before its expiry date.

2. A notice of termination is a communication relating to the payment of the contract price.

3. Termination by notice involves the breach of one or more contractual obligations.

4. Termination by default occurs when the parties agree to terminate the contract by mutual consent.

Frustration of contract

Frustration of contract occurs when performance of contractual obligations is impossible for some

unforeseeable event beyond the party’s control which prevents it from fulfilling its obligations. The legal

consequence of this situation is that the non-performing party will not be liable for breach of contract.

Exercise n. 3: Fill in the gaps

Read the following paragraph. Fill in the blanks by selecting the correct terms and expressions below.

“Until the last century, the _____ was that the parties were under an absolute duty to perform their

contractual _____. Starting with the case Taylor v Caldwell (1863), the _____ recognized an exception to

the rule about absolute contract under the doctrine of _____: if further performance of the contract is

prevented because of events beyond the _____ of the parties, the contract is _____ and the parties

discharged from their obligations.”

court terminated obligations rule

control frustration

32

Exercise n.4 Fill in the gaps

TERMINATION CLAUSE

“Either Party shall have the right to terminate this Agreement if the other Party commits a material breach

of any of its undertakings under this Agreement, provided that prior to the termination hereof the non-

defaulting Party shall notify the other Party of the default in writing, stating a reasonable time – in any

event not exceeding 30 (thirty) calendar days from the date the notice is received- within which the

defaulting Party shall have to remedy said default.”

obligations pursuant to default be entitled to contract

providing non-breaching cure

Exercise n. 5 Read the following expressions and complete them by choosing between the options given

below.

1. The contract may be signed in any number of counterparts, each of which when so executed

(a) shall be deemed to be an original

(b) shall be void and of no effect

2. Once the parties have entered into the contract, they can change its provisions by

(a) registering it according to the applicable laws

(b) signing an amendment to the contract

3. A binding contract has to be performed by the parties

(a) in compliance with its terms and conditions

(b) subject to the approval by both parties

4. If one party does not have the ability to enter into a contract

(a) that party will not be bound by its terms and conditions

(b) a third party will perform the contract

Exercise n. 6 Please fill in the gaps in the following letter of termination.

Dear Sirs,

This letter refers to the Sale Agreement between you, BROWNEYE Plc (the “Seller”) and my client,

BIGTREE Ltd (the “Buyer”), dated September 15, 2008. The _______ of the said agreement is the sale of

machinery to be used by the Buyer at its plant in Sicily.

33

At the beginning of 2008, the machinery broke down and the Seller did not _____ _____ its obligation to

repair it, according to Clause 16 of the Sale Agreement.

Despite repeated _______ on the part of our client to repair the machinery, the Seller has to this date not

performed its obligations, which constitutes a ______ ______ of the Sale Agreement as defined in Section

[*] of the Sale of Goods Act.

Therefore, by this _______ you are requested to fulfill the contractual _______ under Clause 16

aforementioned, within one (1) month of receipt of this notice.

Should the aforementioned obligations not be fulfilled within the term stated, the Sale Agreement shall

be deemed _______ according to Section [*] of the Sale of Goods Act.

Furthermore, our client reserves the right to bring a _______ against you to recover _______ caused by

this substantial breach of contractual obligations as referred to hereabove.

I look forward to receiving your comments on the above.

Yours faithfully,

P. Stern

Lawsuit Requests Damages terminated notice

Comply with Substantial Breach Object Obligation

***

Exercise n. 1. Breach of representations and warranties

Recently, the courts seem to have shifted to a more flexible, pro-business interpretation. In one decision,

the Supreme Court heard a claim made by a buyer for a seller's defective performance in selling an

ownership interest in a limited liability company. The buyer claimed that the seller misrepresented the

company's financial status, as it turned out after closing that the company had debts which were not

disclosed to the buyer, together with some other financial information. The Supreme Court held that

nothing prevents the parties to a share purchase agreement from agreeing on certain qualities or

characteristics of the underlying company. If it is proven that the company does not have these qualities,

this is a defect not only of the company, but also of the shares, for which the seller is liable. The Supreme

Court thus confirmed fairly clearly that a breach of representations and warranties regarding the company

can be considered a defect in the shares and, in the absence of any particular contractual provision, the

general doctrine of liability for defects will come into play. This decision can be viewed as a positive shift

on the subject and may help to address any potential concerns from investors (and their lawyers) as to the

level of protection they enjoy before the court in complicated acquisition deals.

34


11. The courts have recently changed their interpretation of the representations and warranties

clauses in share purchase agreements.

12. In the case heard by the Supreme Court, the seller brought a lawsuit against the buyer for breach of

contract.

13. A limited liability company is a corporation where liability of members is limited to their

contribution to the company.

14. It was argued that the plaintiff had not disclosed the company’s true and correct financial situation.

15. After closing, the plaintiff found out that some of the company’s debts had not been disclosed by

the defendant.

16. The Court held that the parties are free to agree on certain qualities of the underlying company.

17. The Court did not consider the breach of representations and warranties as a violation of the

contractual obligations.

18. According to the Court’s decision, a defect in the shares is equivalent to any other defect which

may affect the underlying company.

19. The Court eventually ruled in favour of the seller.

20. The Court’s decision can be viewed as a precedent in favour of the buyer’s position in share

acquisition deals.

Exercise n.2. Give the correct abstract noun for the following verbs.

21. To breach ______________________

22. To fail ______________________

23. To settle ______________________

24. To terminate ______________________

25. To decide ______________________

26. To purchase ______________________

27. To sell ______________________

28. To license ______________________

29. To remedy ______________________

30. To deliver ______________________

31. To claim ______________________

32. To attach ______________________

33. To sign ______________________

34. To state ______________________

35

35. To issue ______________________

36. To guarantee ______________________

37. To inform ______________________

38. To warn ______________________

39. To commit ______________________

40. To transfer ______________________

Exercise n.3 Judicial remedies

In the event the dispute is brought before a court, once it is established that the contract was entered into

and breached, the court will enforce it by giving a remedy for the breach. Generally, the primary remedy

for breach of contract is a judgment awarding damages to the non-breaching party, whereas an order for

specific enforcement of the promise is available only in exceptional circumstances.

Choose the correct word from those suggested below to complete the following sentences.

1. To enforce a contractual _______

2. To breach a _______

3. To remedy a _______

4. To claim for _______

5. To bring a dispute before a _______

6. To _______ a right

7. _______ is a contractual remedy for breach of contract

breach clause contract court enforce

termination damages

Exercise n.4. A force-majeure clause

A force-majeure clause is aimed to protect the parties against failure to perform one or more contractual

obligations because of some unavoidable and unforeseeable events, such as natural disasters or wars,

generally named “acts of God”. The clause states that the party affected by the force-majeure event will

not be liable for failure to perform its obligations. The parties may, alternatively, provide that in case an

event of force-majeure occurs, the contract will be terminated immediately or after a given period of time

should the party’s performance of contract still be restrained or impeded by the force-majeure event.

Conversation

Mr Taylor: Hi Jane, how are you?

36

Mrs Lawrence: Hi David, fine thanks, and you?

Mr Taylor: I’m worried about a claim. Do you remember Northwell Inc., our customer in North Carolina?

Mrs Lawrence: Yes, sure. We sold our machinery to Northwell last year. I remember that.

Mr Taylor: Right. Northwell bought our machinery which broke down before the expiry of the guarantee

period. Apparently, it can’t be repaired and should be replaced.

Mrs Lawrence: Right.

Mr Taylor: The problem here is that the production of that machinery was transferred to White Moon Inc.

last year, so it’s impossible for us now to replace it.

Mrs Lawrence: Still, I’m afraid we have to, considering that the contract for the sale of machinery sets forth

our obligation to repair or replace the product sold in case of defects or malfunctioning.

Mr Taylor: That’s true, but the contract also provides a force-majeure clause. Do you think we can invoke

the application of such a clause? Actually, we are not in that business anymore…and so, it’s impossible for

us to replace the machinery!

Mrs Lawrence: I see your point David, but I’m afraid this is not the matter in this case. A force-majeure

clause applies only in case of unpredictable events that actually prevent the parties from performing their

obligations. In my view, a machinery breakdown cannot be considered an unpredictable event. In fact, we

provided it in the contract and we guaranteed a contractual remedy for such an event.

Mr Taylor: I see your point. You’re right. We have to comply with the guarantee provisions set forth in the

contract.

Mrs Lawrence: I think so. I do not believe that a force-majeure clause can be invoked in this case.


1. Mrs Lawrence is a legal counsel for Blue Star.

2. Mr Taylor asks Mrs Lawrence for some advice on a claim.

3. Northwell Inc. sold some machinery to Blue Star.

4. The contract for the sale of the machinery does not provide any remedy in case of machinery

breakdown.

5. Blue Star was committed to repair or replace the defective machinery under the contract.

6. Mr Taylor would like to invoke a force-majeure clause to avoid the machinery replacement.

7. Mrs Lawrence believes that a force-majeure clause can be invoked in this case.

Exercise n. 5. Force-majeure clause

Read the following force-majeure clause.

“No failure, omission or delay of either Party in the performance of any obligation of this Agreement shall be

deemed a breach of this Agreement nor create any liability hereunder, if the failure, omission or delay shall

37

arise from acts of God, laws, rules, regulations or orders of any governmental authority, floods, fires,

explosions, storms, earthquakes, acts of war (declared or undeclared), rebellion, insurrections, riot, sabotage,

shortages of fuel, power, energy resources, and/or raw material, invasion, epidemic, quarantine, accident,

strikes, lockouts, labor disputes, or any other comparable cause beyond the reasonable control of the Party

concerned.”


1 Force-majeure clauses provide that the parties have to perform the contract also in case a force-majeure

event occurs.

2 Force-majeure clauses generally exclude liability of the party affected by the force-majeure event.

3 Generally, a force-majeure event is foreseeable by the party.

4 The failure or the omission to perform will constitute a breach of contract in case a force-majeure event

occurs.

5 The force-majeure clause concerns events which are under the party’s control.

Exercise n. 6. Please fill in the gaps in the paragraph below.

In Taylor v Caldwell (U.K. 1863), Taylor, the claimant, had rented the Surrey Gardens and Music Hall for a

series of concerts. However, after ___________ the agreement and before the date of the first

performance, the hall was completely destroyed by fire. The ___________ sued Caldwell claiming that the

___________ had been breached. Caldwell objected that the burning down of the music hall was an

___________ event which actually prevented both parties from performing the contract. It was finally held

by the ___________ that the contract was frustrated by the occurrence of events beyond the parties’

control and that the parties had to be discharged from their contractual ___________.

unforeseeable court claimant

contract signing obligations

COMPARATIVE LEGAL ENGLISH

Avv. Serena de Palma

Exercise n. 1

Please complete each sentence by choosing the correct option (a or b)

11. Enterprises are managed by

a. employees

b. entrepreuners

12. An incorporated company is

a. a government agency

b. a legal person distinct from its members

13. A partnership is formed by

38

a. shareholders

b. partners

14. A limited liability company

a. is not a legal person

b. is a legal person

15. A company is

a. a corporation with the purpose of profit

b. a corporation formed to pursue charitable purposes

16. Partnerships are formed by

a. by two or more persons to carry out a business together

b. by two or more people to carry out a business together

17. Directors

a. Invest money in buying the company’s shares

b. carry out the company’s business

18. Partners are

a. liable severally and jointly

b. liable up to the amount they contributed in the partnership

19. A capital contribution is

a. a document signed by the company members

b. the amount of money paid by a person to become a company member

20. Limited liability of members is a legal consequence of

a. the legal personality of a company

b. the contribution made by the members

Exercise n. 2. Complete this table by filling the correct noun or verb form.

VERB ABSTRACT NOUN PERSONAL NOUN

To administrate Administration Administrative

Liquidation

Audit

To issue

To provide

To direct

Redemptor

Transfer

To chair

To intervene

Promotion

Adviser/or

Investor

Management

To delegate

Exercise n. 3. Please read the letter of advice below.

Dear Mr Brown

Re: Special shareholders meeting of Redcat Inc.

39

I have now had an opportunity to research the law on this point and I can provide you with the following

advice.

Firstly, to summarise the facts of the case, a group of shareholders of Redcat Inc. has filed an action in the

district court seeking to set aside the election of the board of directors on the grounds that the

shareholders’ meeting at which they were elected was held less than a year after such meeting.

The bylaws of the company state that the annual shareholders’ meeting for the election of directors be

held at such time each year as the board of directors determines, but no later than the fourth Wednesday

in July. In 2010, the meeting was held on July 18th

. At the discretion of the board, in 2011 the meeting was

held in March 20th

. The issue in this case is whether the bylaws provide that no election of directors for the

ensuing year can be held unless a full year has passed since the previous annual election meeting.

The law in this jurisdiction requires an ‘annual’ election of the directors for the ensuing ‘year’. However,

we have not found any cases or interpretation of this law which determine the issue of whether the law

precludes the holding of an election until a full year has passed. The statutes give wide leeway to the board

of directors in conducting the affairs of the company. I believe this is unlikely that a court will create such a

restriction where the law has not specifically done so.

However, this matter is complicated somewhat by the fact that there is currently a proxy fight underway in

the company. The shareholders who filed suit are also alleging that the early meeting was part of a

strategy on the part of the directors to obstruct the anticipated proxy contest and to keep these

shareholders from gaining representation on the board of directors. It is possible that the court will take

this into consideration and hold that the purpose in calling an early meeting was to improperly keep

themselves in office. The court might then hold that, despite the fact that no statute or bylaws was

violated, the election is invalid on a general legal theory that the directors have an obligation to act in good

faith. Nevertheless, courts are usually reluctant to second-guess the actions of board of directors or to play

the role of an appellate body for shareholders unhappy with the business decisions of the board. Only

where there is a clear and serious breach of the directors’ duty to act in good faith will a court step in and

overturn the decision. The facts in this case simply do not justify such court action and I therefore conclude

that it is unlikely that the shareholders will prevail.

Read the whole letter and choose the best answer to each of these questions

1 On which grounds did the shareholders file the action?

(e) On the ground of their rights as shareholders

(f) On the grounds of a violation of the bylaws

(g) On the grounds of an ongoing proxy fight

(h) On the grounds of their lack of faith in the board of directors

2 What does the writer identify as the issue of the case?

(e) Whether the annual shareholders’ meeting determines the term of the board of directors

(f) Whether the election of the board of directors requires a quorum

(g) Whether the annual shareholders’ meeting must be held a full year after the last one

(h) Whether the bylaws define the term ‘full year’

3 What does the writer say regarding earlier cases related to this one?

(e) They provide for an analysis in favour of the shareholders

(f) They give the board of directors the freedom to run the company as they see fit

(g) They have merely provided an interpretation of the legislative intent

(h) They do not address the issue involved

4 What reason does the writer give for his conclusion?

(e) It is dubious that the shareholders will prevail

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(f) The facts of the case do not support judicial intervention

(g) A court of appeal will only look at the facts of the case

(h) The board of directors has a duty to act in good faith

Choose the best explanation for each of those words or phrases from the letter above

1 on the grounds that

(d) In the area of

(e) On the basis of the fact that

(f) Despite the fact that

2 at the discretion of

(d) According to the decision of

(e) Through the act of

(f) Due to the secrecy of

3 the ensuing year

(d) The next year

(e) The present year

(f) The past year

4 statutes give wide leeway

(d) Statutes can easily be avoided

(e) Statutes allow considerable freedom

(f) Statutes restrict extensively

5 alleging

(d) Stating without proof

(e) Making reference to

(f) Proposing

6 to act in good faith

(d) To act from a religious belief

(e) To do something with honest intention

(f) To plan for the future carefully

Exercise n. 4. Please match the prepositional phrases with their definitions.

1 in terms of

2 in the course of

3 by way of

4 in response to

A for the purpose of

B as an answer to

C with respect to

D while, during

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Exercise n. 5. Complete these sentences using the prepositional phrase from exercise 4 which

best fits in each one. For one sentence there is more than one correct answer.

Ex. In the course of choosing the name of the company, a number of matters must be considered.

1 Confidential information acquired ______________________ of one’s directorship shall not be

used for personal advantage.

2 I would advise that members of your project group formalize your relationship

______________________ a partnership agreement.

3 This form of corporation is often considered to be the most flexible body

______________________ corporate structure.

4 Our company formation experts are unable to provide advice ______________________ your

query, as there are a number of factors which need to be taken into account which do not relate

directly to this area of expertise.

5 The relationship between management and board of directors at US multinational companies

has been changed dramatically through a series of corporate governance initiatives begun

______________________ corporate scandals.

6 shareholders and other investors in corporations tend to view corporate governance

______________________ the corporation’s increasing value over time.

7 Regular and extraordinary board meetings may be held by telephone, video- conference and

______________________ written resolutions.

*** Exercise n. 1. Fill in the gaps.

1. Uniform contract rules were set forth ____ the EU

a. with

b. by

c. from

2. Clauses __ 3 and 4 have been amended by the Distributor’s lawyer

a. no.

b. n.

c. nos.

3. The parties to an international contract are _____ free to choose the applicable law to

their business relation

a. never

b. sometimes

c. always

4. The Distributor ____ goods or services from the Principal

a. sells

b. buys

c. promotes

5. In a Sole Distribution Agreement, the Principal _____ his right to sell goods in the Territory

a. reserves

b. renounces

c. grants

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6. By promoting business in a Territory, the Agent accrues the right to be paid a _____ by the

Principal

a. salary

b. expense

c. commission

7. An invoice must be paid when it becomes __ and payable

a. late

b. offset

c. due

8. This agreement shall be governed by German ____

a. Rule

b. Law

c. Statute

9. The premises and ____ shall form integral part of this Agency agreement

a. annexes

b. parties

c. attorneys

10. Company X ____ Company Y as its Exclusive Distributor in the Territory

a. appoints

b. supplies

c. elects

11. The Agent has a duty to report __ any trademark violation in the Territory

a. on

b. of

c. with

12. While a Distributor purchases goods, an Agent ____ sales

a. makes

b. commits to

c. promotes

13. The Principal may ____ the agreement if the Distributor does not reach the agreed annual

minimum purchase

a. terminate

b. expire

c. default

14. The Agent acts __ the name and on behalf of the Principal

a. on

b. at

c. in

15. An Exclusivity clause ___ the Distributor to sell products similar to the Products

a. allows

b. doesn’t allow

c. is allowed

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16. A __ clause provides that a Party may rescind an agreement before its natural expiry

a. termination

b. duration

c. exclusivity

17. A non compete clause usually disciplines a Distributor’s duty not to compete ____ the

expiry of the agreement

a. before

b. after

c. while

18. The Agent has a right to commission on sales ___ the Territory

a. within

b. without

c. outside

19. In English numbers, the annual minimum purchase of one hundred thousand Euros is

written

a. 100,000.00 Euros

b. 100.000.00 Euros

c. 100.000,00 Euros

20. In order to obtain payment of the goods, the Principal must ___ an invoice to the

Distributor

a. issue

b. sell

c. show

21. An Agent’s commission usually consists of a ____ on the Principal’s sales in the Territory

a. percentage

b. purchase

c. indemnity

22. The Agent __ not allowed to promote the Principal’s business outside the Territory

a. has

b. is

c. must

23. The signed documents are ___ sent by courier

a. have

b. going to

c. being

24. The lawyer was ___ by his client that the deal had been closed

a. told

b. said

c. spoken

25. Chose the correct phrase:

a. I was given the documents by my lawyer

b. I has given the documents to my lawyer

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c. The documents were given to me from my lawyer

26. When you are on first name terms with someone you write

a. Dear Sirs

b. Dear John

c. Dear Mr Smith

27. In a business relationship, you address a woman as

a. Miss

b. Mrs

c. Ms

28. I am looking _____ to receiving you prompt answer

a. ahead

b. forward

c. back

29. Supplier will not be liable for any ____ in filling the purchase orders

a. Money

b. Delays

c. Performance

30. Supplier warrants that the goods will ___ with their description

a. Provide

b. Comply

c. Agree

31. The court stated that the supplier was liable for damages due to late ____

a. Delivery

b. Compliance

c. Interest

32. The lawyer amended the supply agreement ____ to his client’s suggestions

a. According

b. Providing

c. Complying

33. The parties entered ___ this agreement one year ago

a. In

b. Into

c. Of

34. The company has carried ___ his obligation under the contract

a. In

b. Forward

c. Out

35. This contract sets ___ the provisions agreed between the parties

a. Out

b. For

c. Forth

36. The members decided to wind ___ the company

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a. Out

b. Up

c. Off

37. The parties ___ signed this agreement on 31th December 2010

a. Hereto

b. Whereof

c. Therefrom

38. The price list is ____ attached as Annex 5

a. Thereof

b. Hereto

c. Whereof

39. The clause ____ provides the supplier’s obligations under the contract

a. Hereinafter

b. Which

c. Forward

40. The goods are ____ to have been accepted 15 days following their delivery

a. Thought

b. Deemed

c. Arranged

41. Each party to the agreement undertakes to ____ his/her contractual obligations

a. execute

b. subscribe

c. perform

42. The party is entitled ____ contractual damages

a. For

b. To

c. Of

43. Artificial ____ are entities having legal personality

a. People

b. Companies

c. Persons

44. In the USA, lawyers are also called Attorneys __ Law

a. in

b. of

c. at

45. A contract sets ___ the terms and conditions of an agreement between the parties

a. in

b. off

c. forth

46. The breaching party is ___ for any loss or damages suffered by the other party

a. liable

b. culpable

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c. subject

47. The ___ of an agreement sets forth the main obligations of the parties

a. object

b. premises

c. reason

48. General conditions usually consist __ the terms and conditions of purchase and sale

a. in

b. by

c. of

49. “Quality of products” is usually contained in a ____ clause.

a. indemnification

b. warranty

c. disclaimer

50. The term of an agreement is its ___.

a. condition

b. duration

c. termination

51. When a party ____ a contractual right it renounces to enforce such right.

a. upholds

b. waives

c. performs

52. Each party must ___ its contractual obligation pursuant to the terms this Agreement.

a. execute

b. perform

c. do

53. A warranty obligation is ___ when it is not spelled out in the agreement.

a. express

b. waived

c. implied

Exercise n. 2. Non-disclosure Agreement (N.D.A.)

In the negotiation process, the parties may decide to protect the flow of information exchanged

between them by signing a Non-disclosure Agreement (also termed as Confidentiality Agreement).

The purpose of this agreement is to set forth an obligation to keep confidential any and all

information disclosed by one party, defined as the “Disclosing Party”, to the other party, defined

as the “Receiving Party”. This information will be marked and treated as Confidential Information.

Fill in the blanks by selecting the correct terms and expressions below.

“Each Party commits to the other that it will treat as _______ the terms of this Agreement,

together with all information, whether of a technical nature or otherwise relating to the _______

or affairs of the other ________ as may be communicated to it (the “Confidential Information”).

Each Party shall use its _______ and shall take every reasonable precaution to ________ and

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maintain the confidentiality of the Confidential Information, _______ which shall be at least

________ in scope and effect to the measures taken by that Party to protect its own confidential

proprietary ________.”

Party Best efforts Equivalent Precautions

Information Business Protect Confidential

Exercise n.3. Please fill in the gaps with the missing prepositions, by choosing among those listed

hereunder.

Prepositions: As – On - At - In - To - Of

1. The partnership shall begin ___ 31 March 2012, and shall continue until terminated ___

herein provided.

2. The partnership may be dissolved ___ any time by agreement of the partners, ___ which

event the partners shall proceed with reasonable promptness to liquidate the business of the

partnership.

3. A limited partnership allows each partner to restrict his or her personal liability ___ the

amount ___ his or her business investment.

4. ___ order to change status, a partnership simply files an application for registration ___ a

limited liability partnership with the appropriate state agency.

5. The only requirement to set up a limited company is that each subscriber ___ the

memorandum must take at least one share ___ the company.

6. Registration of a limited liability company involves preparing a number of documents and

delivering them ___ the Registrar of Companies ___ Companies House.

7. Promoters are persons who decide to set up a company; they are placed ___ a fiduciary

relationship with a company once it has been formed.

8. Membership rights generally consists of sharing ___ the profits of the company (dividends

and other distributions), sharing ___ any surplus on a profitable winding up of the company and

any voting rights ___ shareholders meetings.

9. Subscribers ___ the memorandum of association ___ a private liability company become

the first shareholders of the company once the company is formed and their name are entered

___ the register of members.

Exercise n. 4. Please match each term or expression in bold characters to its meaning.

SOLE TRADER A. The amount of capital contributed by

the members into the company’s capital

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PARTNERSHIP B. Someone who runs a business as a self

employed person

DIRECTORS C. They run the company’s business on a

day-to-day basis

SHAREHOLDER D. Two or more persons who run and own

a business together

INCORPORATION E. They undertake to form a company with

reference to a given project

SHARE CAPITAL F. Company member and owner of a

shareholding in the company

PROMOTERS G. The person appointed to lead the

directors board meetings and the

shareholders’ meetings

CHAIRMAN H. The process of setting up a company

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