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Legal & Regulatory Aspects of FP > Chapter 12 - Practical Contracts > Flashcards

Chapter 12 - Practical Contracts Flashcards

1
Q

What are the four times that a contract needs to be in writing?

A
  1. The Statute of Frauds requires it
  2. The deal is crucial to your life of the life of your business
  3. The terms are complex
  4. You do not have an ongoing relationship with the other party.
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2
Q

What is a lawyer’s primary goal?

A

To protect their clients by avoiding litigation, now and in the future.

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3
Q

When is it best to negotiate touchy subjects?

A

When the relationship is just beginning, when everyone is on friendly terms and eager to make a deal, rather than waiting until trouble stikes.

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4
Q

What are some costs of using a lawyer?

A
  • Legal Fees
  • Time spent bargaining
  • Hours used to read complex provisions
  • the potential for goodwill to erode during negotiations.
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5
Q

What does ‘Control the Pen’ mean?

A

Be the one who prepares the first draft of the contract.

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6
Q

Typically, which party prepares the contract draft?

A

The party with the most bargaining power.

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7
Q

Why might a party use vagueness?

A

They are trying to get a commitment from the other side without obligating itself.

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8
Q

What is the true test of whether a vague clause belongs in a contract?

A

Whether you would sign the contract if you know that the other side’s interpretation would prevail in litigation.

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9
Q

How is ambiguity interpretted?

A

Against the drafter of the contract.

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10
Q

What is the difference between vagueness and ambiguity?

A

Vagueness occurs when the parties do not want the contract to be clear. Abiguity means the provisions is accidentally unclear.

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11
Q

When does ambiguity occur?

A

When the parties think only about what they want a provision to mean, without considering the literal meaning or the other side’s perspective.

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12
Q

What are the three things does intpreting the ambiguity against the draftor is meant to do

A
  • Protect laypeople from the dangers of form contracts that they have little power to change. The courts are especially sympathetic to laypeople if a company prepares a form contract and give the otherside only a “take it or leave it” option.(Think Insurance Policies)
  • Protect people who are unlikely to be represented by a lawyer. Most people do not hire a lawyer to read form contracts. And without an experienced lawyer, it is highly unlikely that an individual would be aware of the ambiguity.
  • Encourage those who prepare contracts to do so carefully.
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13
Q

What an a Scrivener’s Error?

A

A typo (A scrivener is a clerk how copies documents)

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14
Q

What happens in the case of a Scrivener’s Error?

A

A court will reform a contract if there is clear and convinving evidence that the mistake does not reflect the true intent of the parties.

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15
Q

What things should you check at minimum when reviewing a contract?

A
  • Names of the parties
  • The Dates
  • Dollar Amounts
  • Interest Rates
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16
Q

What is the structual parts that make up a contract? 6

A
  • Title
  • Intro Paragraph
  • Covenants
  • Breach
  • Representation and Warranties
  • Boilerplate
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17
Q

How should a title be worded?

A

Be as descriptive as possible so you can distinguish one contract from another.

18
Q

To the above-right of the Title, what is there space for?

A
  • Date of Contract

- Subject

19
Q

What does the introductary paragraph include?

A
  • The date
  • The names of the parties
  • Addresses
  • The nature of the contract
  • Nature of each entity
20
Q

What are defined terms? Why?

A

The names of the parties and subject (book’s case, movie). They can be called later things such as “Artist”.
This way the actual names do not have to be repeated throughout the agreement

21
Q

What is a Covenant?

A

A promise in a contract the parties make about what they will do in the future/. All the line items you are negotiating for.

22
Q

What is a Material Breach?

A

A violation of a contract that defeats the essential purpose of the agreement.

23
Q

What is Sole Discretion?

A

A party to a contract has the absolute right to make a decision on that issue.

24
Q

What is Reasonable

A

Ordinary or usual under the circumstances.

25
Q

What is Good Faith?

A

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

26
Q

What are Reciprocal Promises?

A

Promises that are each enforceable independently.

27
Q

What are Conditional Promises?

A

Promises that a party agrees to perform only if the other side has first done what it promised.

28
Q

What are Representations and Warranties?

A

Statements of fact about the past or present.

29
Q

In a contract between two companies, each side will generally represent and warrant facts such as:? 4

A
  1. They legally exist
  2. They have the authority to enter into the contract
  3. Their financial statements are accurate
  4. They own all relevant assets.
30
Q

What is the Boilerplate?

A

The standard previsions that are typically placed in a section entitled Miscellaneous.

31
Q

What are the standard boilerplate provisions? 12

A
  • Choice of Law
  • Choice of Forum
  • Modification
  • Assignment of Rights
  • Delegation of Duties
  • Arbitration
  • Attorney’s Fees
  • Integration
  • Severability
  • Force Majeures
  • Notices
  • Closing
32
Q

What are Choice of Law Provisions?

A

Determine which state’s laws will be used to interpret the contract

33
Q

What is Choice of Forum Provisions?

A

Determines the state in which any litigation would take place

34
Q

What is Assignment of Rights?

A

A transfer of benefits under a contract to another person

35
Q

What is Delegation of Duties?

A

A transfer of obligations in a contract

36
Q

Can one state’s courts apply another state’s laws?

A

Yes

37
Q

What is Modification?

A

It is the portion that tells you if and how changes can be enforceable and legitimate.

38
Q

What is the purpose of an Integration Clause?

A

It it is to prevent either side from later claiming that the two parties had agreed to additional provisions (Ones brought up during negotiations but that weren’t made into the final contract)

39
Q

What does a severability provision do?

A

It, for whatever reason, some party of the contract turns out to be unenforceable, a severability provision asks the court simply to delete the offending clause and enforce the rest of the contract.

40
Q

What is a Force Majeure Event?

A

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

Legal & Regulatory Aspects of FP (26 decks)

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