Contract Interpretation

Question 1

Define

A statement made to induce someone to enter into a contract

Answer 1

Representation

Question 2

Define

A statement of fact, not opinion, made by one party, of sufficient weight to induce the other party to enter into a contract

Answer 2

Material representation

Question 3

Define

A provision of a contract; can be conditions or warranties

Answer 3

Term

Question 4

Define

An essential term of a contract, the breach of which denies the innocent party the benefit of the contract or defeats the purpose of the contract

Answer 4

Condition

Question 5

Define

A minor term of a contract, the breach of which does not defeat the contract’s purpose

Answer 5

Warranty

Question 6

Define

If a contract is in writing and is clear, no other written or oral evidence is admissible to contradict, vary, or interpret the agreement

Answer 6

Parol Evidence Rule

Question 7

What is the Golden Rule?

Answer 7

Using plain language with ordinary meaning, as long as it does not lead to an absurdity

Question 8

What are some exceptions to the Parol Evidence Rule?

Answer 8

• Ambiguous contract language
• essential collateral agreement
• condition precedent existing outside the contract
• remedy of rectification

Question 9

Where a term agreed to in negotiations is inadvertently omitted from the written document, a party may ask to have that term included by way of rectification or correction of the document, provided that…

Answer 9

• a mistake in recording the intention of the parties,
• there is evidence of a common intention, or
• there is clear and cogent evidence of the mistake

Question 10

Define

a remedy whereby a court orders a change in a written document to reflect what it ought to have said in the first place

Answer 10

Rectification

Question 11

Define

a contract clause that limits the parties’ liability

Answer 11

exclusion/exemption clause

notice must be given prior to entering into contract

Question 12

Define

contra proferentem rule

Answer 12

a rule used is the interpretation of a contract when dealing with ambiguous terms according to which a court will choose the interpretation favoring the party who did not draft the contract

Question 13

The following are the most common forms of what:
* low compensation
* prohibit lawsuit
* ore-assessed damages

Answer 13

Penalty clauses

Question 14

Define

A contract term imposing a penalty for default or breach for a predetermined amount of damages that may be far in excess of the actually damages suffered

Answer 14

Penalty clause

Question 15

Define

A term in a contract that attempts to reasonably estimate the damages that will be suffered if the contract is breached

Answer 15

Liquidated damges clause

Question 16

Define

the relationship that exists between the parties to a contract

Answer 16

Privity

Question 17

What are some exceptions to privity in a contract?

Answer 17

• partnerships
• insurance (ie beneficiaries)
• contracts with restrictions on real property

Question 18

Define

A requirement that the parties to a contract agree to substitute a new contract for an existing one, thereby terminating the existing contract

Answer 18

Novation

Question 19

Define

The performance of obligations inder a contract by a third party in circumstances which the original party remains responsible for proper performance

Answer 19

Vicarious performance

Question 20

Define

An assignment that does not fulfill the statutory critera for a legal assignment but is enforced by the courts in the interest of equitability, justice, and fairness

Answer 20

Equitable assignment

Question 21

Define

A transfer by one party of their rights under a contract to a third party

Answer 21

Assignment

Question 22

Define

An intangible right of ownership in a tangible thing that carries the right to take legal action on it - eg debts, insurance policies, negotiable instruments, contract rights, patents, copyrights

Answer 22

Chose/thing in action

Question 23

Define

An assignment that fulfills the critera set out in the relevent statutes and is enforced by the courts

Answer 23

Statutory assignments

Question 24

An asignee to a statutory assignment may enforce a contract without involving the assignor if..

Answer 24

• the assignment of rights is absolute and unconditional
• the assignment is in writing and signed by the assignor
• express notice of the assignment, in writing, is given to the party to be charged

Question 25

What defenses are assignments entitled to?

Answer 25

All equitable defences that exist between the original parties to the contract up until the time of notice

Question 26

Define

Where a debtor owes a debt to a creditor, but the creditor also owes a debt to the debtor that can used to cancel or reduce the amount owed to the creditor

Answer 26

Setoff