Commercial contracts Flashcards
What are Heads of Terms?
Memoranda of understanding that are commonly intended to be non-binding but often carry a substantial amount of moral force
Heads of Terms serve as a preliminary agreement outlining the main terms of a deal.
What is a Letter of Comfort?
A document from a parent company to a bank assuring that its subsidiary will be able to make loan repayments
Letters of Comfort are not legally binding but provide reassurance to lenders.
What is the ‘Battle of the Forms’?
A situation where parties attempt to contract using their own standard terms; whoever sends their terms last wins
This often leads to disputes over which terms apply.
What are Conditions Precedent?
Stipulated criteria or conditions that must be met before the agreement or certain parts of the agreement come into force
These conditions are often found at the start of a contract.
What is the difference between Assignment and Novation?
Assignment transfers only the benefits of an agreement; Novation transfers both the benefits and the burdens
Assignment is a bipartite agreement, while Novation is tripartite and requires consent from all parties.
What authority do individual partners have in a partnership?
Individual partners do not have the authority to execute a deed on behalf of a partnership unless this authority is conferred by deed
A deed should be executed by all partners unless a power of attorney is granted.
What is required for a document to be executed as a deed by a company?
Must be signed by two authorised signatories or by a single director in the presence of a witness
If a seal is used, it must be signed by two directors or a director and a company secretary.
What is the limitation period for actions arising from a contract executed as a deed?
Twelve years
This is longer than the six-year limitation period for simple contracts under hand.
What is a Simple Contract/Agreement under Hand?
A contract that can be executed by a duly authorised person, with no additional requirements unless specified in the company’s articles
These agreements do not require the formalities of a deed.
Why might a deed be needed?
- The law situplates it must be a deed
- It is desirable to have the longer limitation period
- A deed is binding without consideration
