Chapter 5

Question 1

What are the benefits of a written contract?

Answer 1

reduce risk of misunderstanding, potential conflicts addressed at the start, less uncertainty, parties are more likely to work together.

Question 2

What is consideration?

Answer 2

a mutual exchange of
promises required, along with an offer and an
acceptance, to create an enforceable contract; for
example, in an employment contract, consideration is a promise of payment in exchange for a promise to perform the work

Question 3

What are implied terms?

Answer 3

default or mandatory rules that the courts assume are part of an employment agreement, even if they have not been expressly included in the employment contract

Question 4

What does incorporated by reference mean?

Answer 4

when a second document is included as part of a
first document because it is listed or named within the first document

Question 5

What is the contra proferentum rule?

Answer 5

the doctrine of interpreting ambiguous contract language against the interests of the party that drafted the language

Question 6

What is the duty to mitigate?

Answer 6

he duty to mitigate refers to the obligation placed on a dismissed employee to look for a job that is comparable to the one from which the employee has been dismissed during the common law reasonable notice period. I

Question 7

What are express terms?

Answer 7

written in or orally agreed to.

Question 8

Is probationary period an implied term?

Answer 8

No it must be expressly stated.

Question 9

What are restrictive covenants?

Answer 9

clauses that protect an employer’s business interests by restricting what an employee can do during, and especially after, employment with regard to such matters as confidential information and customer lists.

Question 10

What are three types of restrictive covenants?

Answer 10

1. Non-disclosure clauses
2. Non-solicitation clauses
3. Non-competition clauses

Question 11

What are non-competition clauses?

Answer 11

If enforceable, these clauses prevent a departing employee from competing with the employer. They are typically drafted to restrict competition for a specific time within a specific geographic area. For example, an employee could agree that they will not start up a business that competes with the employer’s in the city where the employee has worked for the employer for 12 months after employment ends.

Question 12

Why are courts suspicious of non-competition and non-solitication clauses?

Answer 12

because they affect a former employee’s ability to earn a living in that person’s area of expertise or in their usual geographic location. Courts will be seeking evidence to demonstrate that the restrictions only go as far as reasonably necessary to protect the legitimate business interests of the employer.

Question 13

What does an employer have to show to prove that a non-competition clause is reasonable?

Answer 13

the non-competition clause is necessary to protect the employer’s legitimate business interests,
* the non-competition clause covers a reasonable length of time and geo-graphic area, and
* a non-solicitation clause would not adequately protect the employer’s legitimate interests in the circumstances (Israel, 2004).

Question 14

What is a choice of law clause?

Answer 14

A choice-of-law clause specifies the jurisdiction whose laws govern the contract

Question 15

What is an entire-agreement clause?

Answer 15

this clause states that the signed contract constitutes the entire agreement between the parties. Previous conversations, negotiations, and promises that may have been made during the hiring process are not binding on either party. This clause is intended to ensure that in case a dispute arises, a court is restricted to the words of the contract in settling the dispute.

Question 16

What is the independent legal advise clause and what is the impact of it?

Answer 16

this clause states that the employee has had the opportunity to seek independent
legal advice before signing the contract. The statement must, of course, be true and include sufficient time for an employee to pursue such advice if they wish. An employee who has had an opportunity to obtain independent legal advice will find it difficult to challenge the contract later on the basis that they were unaware of its terms or of their legal meaning, as it will likely be assumed that a lawyer fully explained the terms of the contract and explained the law surrounding the particular items in the contract.

Question 17

What is a sever-ability clause?

Answer 17

his clause provides that if a court invalidates part of the employment contract, it will not affect the validity of the remainder of the agreement. An unenforceable clause will simply be severed from the rest of the agreement. A severability clause may be especially important where there is a non-competition provision in the con-tract, to ensure that if the non-competition clause is found invalid, the rest of the contract will remain in force

Question 18

What are several things the employer can do to help with inequality of bargaining power?

Answer 18

• Ensure that the terms of the contract represent a reasonable balance between the interests of both parties.
• Provide the candidate with a written copy of the proposed contract and give the candidate enough time to read it and obtain independent legal advice before signing. This allows the person to carefully review the terms of the contract and to understand them or have them explained fully so that the employee cannot later claim to have been unaware of a term or its meaning.
• Include a provision in the contract stating that the candidate had the oppor-tunity to obtain independent legal advice before signing.
• Include a certificate of independent legal advice for the lawyer to review and sign confirming that they have fully explained the terms and laws referred to in the contract.
• Draw the candidate’s attention to key terms such as non-competition, non-solicitation, and termination notice clauses and have the candidate initial them.

Question 19

What is obsolescence?

Answer 19

A contract may be challenged on the ground of obsolescence where its terms no longer reflect the realities of an employee’s position within the organization.

Question 20

Employers should keep the following tips in mind when drafting employment
contracts to reduce the risk that a contract, or a term of a contract, will be ruled unenforceable by a court:

Answer 20

1. Use clear language. The contra proferentem rule may result in ambiguous language being interpreted in favour of the other party.
2. Be fair when negotiating terms. Evidence of unfairness or undue influence in negotiating terms may render the contract void.
3. Give the other party time to read, understand, and seek independent legal advice about the contract before signing it.
4. Meet or exceed the minimum statutory standards. 5. Bring critical terms to the other party’s attention. For example, an employer who drafts an agreement should bring clauses related to a probationary per-iod to an employee’s attention and have the employee initial those clauses.
5. Provide additional consideration if the employer wants a new term included in the contract after it is signed or after employment begins.
6. Customize contracts rather than use a standard form. It is important that the parties consider special issues that need to be addresse