Chapter 6 Contracts.pptx Chapter 6 Contracts.pptx

Chapter 6 Contracts.pptx

1. IMPORTANT DATES ASSSIGNMENT S – November 10 (Fri) MIDTERM – November 1 7 (Fri) FINAL EXAM: NOVEMBER 23 ( Thurs )

2. CONTRACT INTERPRE T A TION CHAPTER 6

3. LEARNING OUTCOMES Describe the goal of contract interpretation Distinguish among representations, terms, conditions, and warranties Explain the parole evidence rule and describe the exceptions the court have developed with respect to the relevance and admissibility of outside evidence in interpreting a written contract Understand the legal rule relating to exclusion (exemption) and penalty clauses Explain the concept of frustration as it relates to contract and common- law and statutory remedies that apply

4. INTRODUCTION Every contract case that comes to court does so either because one party disagrees with the other about what the contract provisions mean, or because he or she knows very well wheat the provisions mean and seeks to escape the consequences meaning. In either situation the case will turn on the court’s interpretation of language of the agreement

5. INTRODUCTION The primary aim of the court is to interpret contracts so as to find and give effect to the intention of the parties – that is, to make the contract work.

6. Major concepts used by the court to interpret contracts Classifying contract provisions : we will examine how the court classify and interpret representations, terms, conditions, and warranties in a contract in terms of the effect those provisions have on rights and responsibilities of the parties Assessing evidence to prove the meaning of a provision: We will look at the search for certainty and the way in which the courts assess evidence using the parol evidence rule to decide the meaning of unclear term or provision

7. Major concepts used by the court to interpret contracts Interpreting exclusion and penalty provisions : we will examine how the courts interpret exclusion and penalty clauses – provisions that seek to enhance or limit liability and damages under a contract when there is a breach Determining Frustration : last, we will examine how court determine when and how a contract may become frustrated so that it has become impossible to perform due to circumstances beyond the control of either party.

8. REPRESENTATION A statement made to induce someone to enter into a contract If a statement is a representation, it is not a part of the contract that e ither party has agreed to. Representations are important in contract law because some misrepresentations may permit the party who is misled to avoid the contract

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

10. TERM A provision of a contract terms are either conditions or warranties If a statement related to a contract is not representations, it may be a term. A term is part of the contract itself, and element of what one party or the other has promised.

11. CONDITION An essential of a contract the breach of which denies the innocent party the benefit of the contract or defeats the purpose of the contract.

12. WARRANTY A minor term of a contract, the breach of which does not defeat the purpose of the contract.

13. WARRENTY V CONDITIION Whether a term is a condition, or a warranty determines what the effect would be if it is breached. A bridge of condition is considered to be so serious as to destroy the value of the contract for the victim of the breach so that he or she is deprived of most or all of the value of the contract. If a bridge is one of the warranty only, it is a judged less serious and the remedies may be more restricted than would be the case for breach of condition. Determining whether a term is a condition, or a warranty is not always easy.

14. THE SEARCH FOR CERTAINTY Where an oral contract exist the parties might get into a disagreement about the terms and each party Relying on Easter and memory as to what was agreed and remembering the terms of the contract will be very different. However, when the contract is in writing it is reasonable to expect that a dispute about its terms can be settled by looking at what is written and by giving the language used in the contract when interpreting the terms. It is also reasonable to say that if the contract is in writing the party should not be able to drag in another evidence oral or written, to contradict the written terms Terms of the agreement

15. PAROL EVIDENCE RULE If contract is in writing and it is clear no other written or oral evidence is admissible to contradict, vary, or interpret their agreement. The court interprets the agreement by looking only at its written terms and does not Consider other evidence because it is not too relevant to determine what the contract means. When a court finds that the language of a contract is unclear or ambiguous and applies the parole evidence rule it has to consider whether there is evidence outside the written agreement that is relevant to interpreting the agreement.

16. AMBIGUOUS CONTRACT LANGUAGE Where it can be shown that the language of the written agreement is unclear or ambiguous, so that the meaning of a term of provision is not certain oral evidence or other written evidence may be used to assist in interpreting the agreement.

17. ESSENTIAL COLLATERAL AGREEMENT A collateral agreement is a separate and independent contract with valuable consideration that could be enforced independently of the main contract or that as some impact or effect on the main contract, but it is not specifically referred to in it. In this case, the court, By giving effect to the collateral contract, well modified and main contract, despite its written terms.

18. ESSENTIAL IMPLIED TERM If the parities use a form of contract that by custom of a trade or by convention usually contains a term that has been inadvertently left our, a party may be able to use oral and written evidence of the custom or convention to show that an implied term of the agreement has been left out.

19. CONDITION PRECEDENT An event (or non- event) that must occur ( or not occur) before a contract can be enforced

20. Smith v Land & House Property Corporation (1884) 28 Ch D 7 FACTS The plaintiff put up a hotel for sale with the particulars stating that it was currently leased to a most desirable tenant. The defendant sent its representative to view the property and the report stated that the tenant could hardly pay the rent and that the town was largely dilapidated. On the basis of the report, the defendant instructed its representative to pay no more than £5,000 for the hotel and the sale was eventually agreed at £4,700. Before the sale was complete the tenant went into liquidation and the defendant refused to continue. The plaintiff sought specific performance. The defendant counterclaimed on the basis that the plaintiff had misrepresented the nature of the tenant. ISSUE The issue in this circumstance was whether the plaintiff’s statement as to the quality of the tenant was a statement of opinion or a representation which induced the defendant to enter into the contract and, if so, whether it was a misrepresentation which allowed the contract to be rescinded. Teacher, Law. (November 2013). Smith v Land and House Property Corp. Retrieved from https:// www.lawteacher.net/cases/smith- v-land-and-house-corp.php?vref=1

21. DECISION It was held that the statement was not one of opinion. The plaintiff had sufficient knowledge of the tenant and its business practices to be able to state, as a matter of fact, whether it was a desirable tenant. The plaintiff also knew that large amounts of rent were owing from the tenant and therefore, the statement as to the tenant’s quality was false. The statement constituted a misrepresentation, and the contract could be rescinded. Teacher, Law. (November 2013). Smith v Land and House Property Corp. Retrieved from https:// www.lawteacher.net/cases/smith- v- land-and-house-corp.php?vref=1

22. RECTIFICATION Rectification is an equitable remedy available to alter the terms of a written agreement where a mistake has been made in the document. It is available in circumstances where the common law might not permit altering the written terms. The rights to this remedy arises where the party to the contract have held long negotiations and have reached an agreement that is reduced to a written document where a mistake was made recording the terms

23. Rectification rectification does not alter the intention of the parties Rather it ensures that the wronging the right wording of the written agreement accurately corresponds to what the parties intended to do Rectification is a powerful remedy and is used with caution because the court watched carefully to ensure that it is not simply a cover for trying to undo a bad bargain

24. EXCLUSION/EXEMPTION CLAUSE a clause in a contract that limits the liability of one of the parties

25. Contract Interpretation

26. REFERENCE Olivo, L. M., & Fitzgerald, J. (2013). Fundamentals of Contract Law (3rd ed.). Emond Montgomery.