Flashcards in CHAP 7: The terms of a contract Deck (23):
#CH7 What is ideal contract?
1. anticipates everything which could go WRONG
2. provides for that possibility
=> NO need to go to COURT/ARBITRATION to RESOLVE a dispute
#CH7 What is RELATIONSHIP btw TERMs of contract n RISK management?
MOST of terms of contract: deal with risk management
#CH7 What are EXPRESS terms?
1. PARTIES have agreed to
2. are contained in the contract
#CH7 If express term is AMBIGUOUS, what will JUDGE do? (ambiguous: more 1 meaning)
#CH7 What is PURPOSE of reasonable person test?
determine most reasonable interpretation (explain)
#CH7 If AMBIGUOUS term: part of a standard form contract, what happens? (Rule: contra preferentum)
benefit of DOUBT: given to person who did not write the contract
#CH7 What will happen to a term NOT included?
left out of the written contract although it was agreed to
#CH7 What is PAROL evidence rule (rule about VERBAL evidence)?
once a contract: put into WRITING
=> any terms NOT included do NOT exist
#CH7 How does ENTIRE agreement clause reinforce PAROL evidence rule?
1. only WRITTEN terms form part of the contract
2. NO other promises or representations
#CH7 If parties don't think of an important term, what will JUDGE do?
fix this omission by implying a term
#CH7 What are potential sources of implied terms?
2. PREVIOUS dealings btw parties
3. trade practice
4. or most economically efficient
#CH7 What is quantum meruit?
Where price: left out of agreement
=> a reasonable price: implied
#CH7 To deal with possibility that s.th: go WRONG => what happens?
a number of terms: included
#CH7 What is a condition SUBSEQUENT?
a specified event occurs => contract ends without liability (often)
1. force majeure (unexpected event that prevent s.o from fulfilling a contract)
2. or WEATHER related clauses
#CH7 What is a condition PRECEDENT?
a specified condition: met => contract: only begin
#CH7 What are real estate deals conditional on?
purchaser: receive mortgage APPROVAL
#CH7 If an interest rate clause deals with risk => what happens?
Payment: be late
#CH7 What is LIMITATION of liability clauses?
max amt of money breaching party: be liable for (breach: an act of breaking a law)
#CH7 What are EXEMPTION clauses?
breaching party: not be liable for any LOSSES arising from a breach of contract
Ex: parking lots exempt themselves from liability for DAMAGE to cars
#CH7 In consumer contracts, what is important?
to draw the customer’s attention to 2 clauses (Limitation of liability clauses n Exemption clauses)
#CH7 What is a LIQUIDATED damages clause?
a PREDETERMINED amt of money which breaching party will pay.
Ex: $1000 for each day delivery is late.
1. amt: must be a GENUINE (authentic) estimate of expected loss
2. amt: NOT an attempt to PUNISH breaching party.
3. NO punitive damages in contract (punitive: intended as punishment)
#CH7 What is a DEPOSIT?
a type of LIQUIDATED damages
_ buyer breaches contract, a deposit: forfeit (lose)