Interpreting Contract Terms Flashcards
What is a promise?
A firm agreement to perform an act, refrain from acting or make a payment or delivery. (ex: shall be)
What are the general rules for distinguishing between a promise and a condition?
Interpret contract terms:
(a) to avoid forfeiture
(b) against the drafter
(c) in case of doubt, find a promise.
What happens when a party fails to fulfill a condition?
Failure to fulfill is not a breach but does excuse other party’s performance.
What is the effect of a condition?
A condition creates a privilege in the case of a condition precedent and a power in the case of a condition subsequent. (ex: shall not be)
What is a condition precedent?
An event that must occur before parties are obligated to perform.
What is a condition subsequent?
An even which, if it occurs will terminate a party’s obligation to perform.
What happens when a party fails to fulfill a promissory condition?
Failure to fulfill is a breach and excuses other party’s performance.
What is a promissory condition?
A promissory condition is a promise whose performance either:
(a) suspends a duty of immediate performance until it occurs, or
(b) gives rise to such duty upon its occurrence.
(Combine condition precedent with condition subsequent – ex: shall be … + shall not be)
What is the 4 Corners Approach to resolving contract ambiguity?
A court will look only to the contract to determine ambiguity.
What is the All Evidence approach to resolving contract ambiguity? (AE + 5 factors)
Look at all evidence, including PE, to determine if ambiguity exists. Seek out ambiguous terms and balance the following 5 factors:
1. Contract Language
2. Parol Evidence
3. Trade Usage including whether both parties were aware or should have been aware of it.
4. Course of performance (how did each party’s performance play out?)
5. Whether K makes more economic sense under one interpretation than the other.
Ambiguous Contract, Multicontract Severability Test
Did the parties agree to all promises as a single whole? (then one K)
