Term
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Definition
| rules that parties develop which the courts will enforce, subject to public policy exceptions found in statutes and common law (also known as planning documents) |
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Term
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Definition
- establishes terms of parties' relationship
- reflects agreement as to rules that will govern transaction
- statement of facts
- promises to future performance
- each party's rights
- events that must occur before each party has to perform
- party's discretionary authority
- how contract will end
- general policies that govern relationship
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Term
| What are a contract's goals? |
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Definition
- accurately memorialize business deal
- clear and unambiguous
- resolve problems pragmatically
- be specific that parties know rights and obligations, but flexible to cope with changed circumstances
- advance client's goals and reduce risks
- give each side enough of what it needs so that each side leaves the table feelnig they negotiated a good dael
- prevent litigation
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Term
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Definition
| covers all negotiated contracts, whatever the topic or dollar amount; not standard form contracts. |
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Term
| contemporary commercial drafting |
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Definition
| draws on principles of plain English and promotes clarity, simpler language, shorter sentences, formatting, etc. |
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Term
| basic principles of contract drafting |
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Definition
- use recitals sparingly
- limit number of definitions
- avoid ambiguity
- do not use false imperative
- tabulate to promote clarity
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Term
| questions to think about when writing contract |
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Definition
- What are client's business goals?
- How can contract frustrate or further those goals?
- What risks inhere in transaction?
- What business issues does provision raise?
- Does provision give other side too much control?
- Do represenations and warranties allocate too much risk to the client?
- How can the drafter change a covenant's standard of liability to reduce the client's risk?
- Should a particular event result in a breach?
- Does the contract provision resolve the client's business problem?
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Term
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Definition
- representations
- warranties
- covenants
- rights
- conditions
- discretionary authority
- declarations
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Term
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Definition
| statement of past or present fact, made as of a moment in time to induce a party to act. |
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Term
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Definition
| promise that if statement is false, amker of statement will indemnify the other party for any damages suffered because of the false statement. |
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Term
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Definition
| promise to do or not to do something; creates duty to perform. |
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Term
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Definition
| opposite of covenant; entitles party to other party's performance. |
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Term
| condition to an obligation |
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Definition
| state of facts that must exist before a party is obligated to perform. |
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Term
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Definition
| gives party a choice or permission to act; sometimes exercise of discretionary authority is subejct to satisfaciton of condition. |
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Term
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Definition
| fact as to which both parties agree; sometimes is subject to satisfaction of a condition. |
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Term
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Definition
| requires drafter to look at each specific agreement of business deal and to translate it into contract concepts (only then can drafter memorialize the business deal and translate it into contract concepts). |
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Term
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Definition
- no reliance component
- acts as indemnity
- maker of statement will pay damages to statement's recipient if statement was false and recipient was damaged
- does not matter whether recipient knew statement was false
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Term
| three types of misrepresentations |
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Definition
- innocent
- negligent
- fraudulent (misrepresentation made with known falsity, scienter)
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Term
innocent/negligent misrepresentation remedies
(some say must be material) |
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Definition
- avoidance
- restitutionary recovery
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Term
| fraudulent misrepresentation |
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Definition
- void contract, seek restiuttion
- affirm contract, retain benefits, and sue for damages based on claim of fraudulent misrepresentation (tort of deceit)
- measure of damages depends on state's law
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Term
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Definition
| equal to value that property was represented to be minus actual value; results in higher damages award and is measure of damages that party generally receives upon contract breach |
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Term
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Definition
| equal to amount π paid for property minus actual value |
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Term
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Definition
| if fraudulent misrepresentation, π may be entitled to punitive damages |
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Term
| Why should party receive both representations and warranties? |
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Definition
- option to void contract and receive restitution only if party receives representations
- may sue for punitive damages by claiming fraudulent misrepresentation
- if party cannot prove justifiable reliance, can sue for breach of warranty
- if state follow out-of-pocket rule for damages for fraudulent misrepresentations, party can still recover greater benefit of damages by suing for breach of warranty
- breach of warranty claim may be easier to prove than fraudulent misrepresentation
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Term
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Definition
| permits injured aprty to unwind the contract; also known as rescission. |
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Term
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Definition
| establishing standards of liability, representations and warranties serve purpose of risk allocating; degree of risk each party assumes with respect to statement varies depending on how broadly or narrowly statement is drafted. |
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Term
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Definition
| absolute, high-risk statement, no room for error. |
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Term
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Definition
| approximating, greater room for error. |
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Term
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Definition
| typical way to indicate pending litigations is to list them on a disclosure schedule and then refer to schdule in the representation and warranty. |
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Term
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Definition
| knowledge each executive would have had if executive had performed a diligent inquiry. |
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Term
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Definition
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Term
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Definition
| suggests that a lawyer is changing language for no substantive reason and is wasting time and money. |
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Term
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Definition
| when parties exchange the agreed performances (typically only in acquisitions and financings). |
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Term
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Definition
| promise to do or not to do something; creates duty to perform. |
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Term
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Definition
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Term
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Definition
| business differences between different ways of expressing a party's obligations. |
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Term
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Definition
| corporate equivalent of test-driving a car before purchasing; examine, among other things, seller's contracts, equipment, financial statements. |
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Term
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Definition
| time between signing and closing in acquisition transactions; buyer may need to obtain financing, parties may need to obtain consents to transacitons or to transfer assets; buyer may perform due diligence if not done prior to; generally no covenants need to be performed. |
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Term
Remedies:
Breach of Covenant |
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Definition
| entitles injured party to sue for damages, and if facts are appropriate, specific performance; measure of damages is benefit of the bargain damages (if breach is so material that it cannot be cured, then party may have right to cancel) |
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Term
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Definition
| flows from another party's duty to perform; from a covenant; person to whom performance is owed has right to that performance; if there is a duty, there is a correlative right. |
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Term
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Definition
| state of facts that must exist before a party is obligated to perform. |
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Term
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Definition
| conditions that if not satisfied do not affect the parties' ongoing contractual relationship. |
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Term
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Definition
| conditions, that if not satisfied permit a party to choose whether to perform or not perform (usually are benefits that party wants to receive before performing the obligation memorialized in subject matter performance provision). |
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Term
| Relationship Between Conditions and Covenants |
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Definition
- walk-away conditions and walk-away rights are sometimes related to party's performance of covenant
- satisfaction of condition may rest on performance of covenant
- condition can be unrelated to any covenant
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Term
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Definition
| gives its holder a choice or permission to act; may exercise authority, but is not required to; once it exercises authority, other party is bound by holder's decision. |
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Term
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Definition
| what a person who has discretionary authority has. |
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Term
| condition to discretionary authority |
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Definition
| exercise of discretionary authority is often subject to state of facts; state of facts that must exist before a party may exercise its discreitonary authority; NOT a right. |
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Term
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Definition
| statement of fact as to which the parties agree; neither party stated fact to induce other party to act, cannot sue on declaration, no rights/remedies associated with it. |
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Term
| condition to a declaration |
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Definition
| state of facts that must exist before a policy has substantive consequences. |
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Term
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Definition
| composed of preamble, recitals, and words of agreement. |
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Term
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Definition
| first paragraph of contract (identifies contract, name of agreement, parties, date parties signed contract) |
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Term
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Definition
| explain background of contract and why parties are entering into it; not enforceable provision; do not provide rights or remedies. |
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Term
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Definition
| they state for record that parties have agreed to terms of contract; also referred to as statement of consideration. |
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Term
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Definition
| shorthand way of referring to complex concepts and ensure that the same concept is said the same way throughout an agreement. |
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Term
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Definition
| used to expand or narrow the ordinary meaning of a word or phrase. |
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Term
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Definition
where the parties:
- agree to perform main subject matter of contract
- agree to pay consideration
- set forth term of contract
- set forth closing date
- list closing deliveries
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Term
| subject matter performance provisions |
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Definition
| each side covenants to other that it will perform main subject matter of covenant; does not always consist of reciprocal covenants of future performance; sometimes, self-executing provision. |
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Term
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Definition
| price, salary, or royalties. |
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Term
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Definition
| the number of years the conract will govern parties' relationship. |
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Term
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Definition
| each party covenants to the other how it will deliver its performance at closing. |
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Term
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Definition
| next-to-last substantive provisions in contract that set forth business terms that govern the end of the parties' contractual relationship; require drafter to determine different ways that a contract can end and how contract will deal with each of scenarios; drafted as conditions. |
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Term
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Definition
| also known as boilerplate provisions; tell parties how to govern their relationship and administer the contract (e.g. notice, choice of law, choice of forum, antiassignment, merger, waiver of jury trial, severability provisions); some are covenants, others declarations. |
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Term
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Definition
| contract concludes with parties' signatures. |
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Term
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Definition
| reflect mutuality of transaction. |
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Term
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Definition
| check that bank issues from its own account; bank's promise to pay recipient. |
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Term
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Definition
| check as to which bank has set aside sufficient funds from paying party's account to ensure full payment of check; bank certifies by having employee sign, funds not available until business day after banking day on which funds deposited, bank can take back payment if discovers it was fraudulently issued. |
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Term
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Definition
| irrevoable, electronic transfer of immediately available funds using a system that the Federal Reserve System maintains (also known as Fed funds transfer). |
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Term
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Definition
| currency, bills, and coins. |
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Term
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Definition
| period less than calendar year that occurs when contract term begins or ends in middle of calendar year. |
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Term
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Definition
| automatically renews contract's term. |
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Term
| time-of-the-essence clause |
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Definition
| if parties MUST close on specific closing date. |
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Term
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Definition
| if time is not of essence, provide parties may jointly postpone closing date. |
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Term
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Definition
| if agreement permits postponements, date after which parties may no longer postpone closing; include endgame provisions that provide for contract's termination and spell out consequences of failure to close (DO NOT put that information in the action section). |
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