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Quiz 20 :

Practical Contracts

Quiz 20 :

Practical Contracts

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A contract provided, "On January 5, Purchaser shall provide Seller with a certified check in the amount of $100,000. Seller shall transfer a deed for the Property to Purchaser." What is wrong with this provision? (a) It is not clear who Purchaser and Seller are. (b) The number $100,000 should be written in words. (c) The promises are reciprocal. (d) The promises are conditional.
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In a provision, purchaser agrees to provide seller with a check of $100,000 on 5 th of January. On the other end seller agrees to provide all the deeds for the property to purchaser.
It is not necessary to write the number $100,000 in words while drafting a contact. So, option (b) is incorrect.
Reciprocal and conditions are mentioned while drafting a contract, to prevent contract breach. There is no such reciprocal promises, and conditions between seller and buyer. So, option (c) and (d) are incorrect.
Answer: option (a), i.e. it is not clear who purchaser and seller are.
Explanation: There is an ambiguity in drafting a contract. The contract should be clear with who the seller and buyer are. Even, the date mentioned in the contract is unclear. So, this is wrong in the particular provision.

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A contract states (1) that Buzz Co. legally exists and (2) will provide 2,000 pounds of wild salmon each week. Which of the following statements is true? (a) Clause 1 is a covenant and Clause 2 is a representation. (b) Clause 1 is a representation and Clause 2 is a covenant. (c) Both clauses are representations. (d) Both clauses are covenants.
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Covenant and representation:
Covenant is a promise given in contract. A representation is that statement, which carries facts related to present and past.
Here, clause 1 states that B legally exists and clause 2 states that 2,000 pounds will be provided to WS every week.
Clause 1 is a representation that talks about the present feature of an organization. But, clause 2 is a covenant that promises 2,000 pounds to a person or a company. Hence, Option
img clause 1 is representation and clause 2 is covenant is correct.
Since (b) is correct, options (a), (c), and (d) are incorrect, as they do not comply with the case requirements or given definitions.

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What are the advantages and disadvantages of hiring a lawyer to draft or review a contract?
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Advantages of hiring a lawyer to analyze or draft a contract are given below:
The major advantage of hiring a lawyer to analyze or draft a contract is as follows:
• The lawyer can protect from all unexpected events in the future. So, a lawyer is appointed to outline a contract.
• When a lawyer drafts contract, all the obvious mistakes can be avoided. So, there will be no typographical errors.
Disadvantages of hiring a lawyer to draft a contract are given below:
The main disadvantage for appointing a lawyer to draft or outline a contract is as follows:
• The lawyer fee is extremely high.
• It is a time consuming process, when a lawyer is hired to outline a contract.

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Zoe has been offered a job as CIO at Appsley Co, but first she has to negotiate a contract with the CEO, Phil. Do a role-play with another student in your class in which one of you takes the role of Zoe and the other is Phil. What terms do you each want? Draft the contract. Now compare your results with others in the class. Who has negotiated the best deal? Who has written the best contract?
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Which of the following statements is true? (a) Vagueness occurs when the parties do not want the contract to be clear. (b) Ambiguity occurs when the parties do not want the contract to be clear. (c) Vagueness in a contract is often appropriate as a way to clinch a deal. (d) Ambiguity is an appropriate tactic, particularly by the party drafting the contract.
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YOU BE THE JUDGE WRITING PROBLEM Chip bought an insurance policy on his house from Insurance Co. The policy covered damage from fire but explicitly excluded coverage for harm caused "by or through an earthquake." When an earthquake struck, Chip's house suffered no fire damage, but the earthquake caused a building some blocks away to catch on fire. That fire ultimately spread to Chip's house, burning it down. Is Insurance Co. liable to Chip? Argument for Insurance Co.: The policy could not have been clearer or more explicit. If there had been no earthquake, Chip's house would still be standing. The policy does not cover his loss. Argument for Chip: His house was not damaged by an earthquake; it burned down. The policy covered fire damage. If a contract is ambiguous, it must be interpreted against the drafter of the contract.
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Simon has signed a contract with Miley agreeing to provide her company with 1,000 frozen pizzas each week. The contract states: "This agreement can only be modified by a written instrument signed by the party to be charged with such amendment." But when Simon and Miley run into each other on the train, they agree that he will provide 750 pizzas instead. Which of the following statements is true? (a) As long as they both agree, they can amend the contract orally. They do not have to sign anything. (b) For the change to be valid, both parties must sign an amendment because both parties are affected by it. (c) Only Miley has to sign the amendment because she is the one to be charged by it. (d) Only Simon must sign the amendment because he is the one to be charged by it.
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ETHICS Sophia negotiated a contract with Pete under which she would buy his company for $10 million plus the amount of the company's outstanding debt (approximately $1 million). But when Pete sent a draft of the contract, it stated that the purchase price would be $10 million less the company's debt. What is Sophia's ethical obligation to Pete? Should she tell him about the mistake? What Life Principles would you apply in this situation?
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What are the penalties if Artist breaches the movie contract? Are these reasonable? Too heavy? Too light?
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Blair Co.'s top officers approached an investment bank to find a buyer for the company. The bank sent an engagement letter to Blair with the following language: If, within 24 months after the termination of this agreement, Blair is bought by anyone with whom Bank has had substantial discussions about such a sale, Blair must pay Bank its full fee. Is there any problem with the drafting of this provision? What could be done to clarify the language?
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Slimline and Distributor signed a contract providing that Distributor would use reasonable efforts to promote and sell Slimline's diet drink. Slimline was already being sold in Warehouse Club. After the contract was signed, Distributor stopped conducting in-store demos of Slimline. It did not repackage the product as Slimline and Warehouse requested. Sales of Slimline continued to increase during the term of the contract. Slimline sued Distributor, alleging a violation of the agreement. Who should win?
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In the movie contract, which side was the more successful negotiator? Can you think of any terms that either party left out? Are any of the provisions unreasonable?
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List three types of contracts that should definitely be in writing, and one that probably does not need to be.
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List three provisions in a contract that would be material, and three that would not be.
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In the case of a scrivener's error, what happens? (a) A court will not reform the contract. The parties must live with the document they signed. (b) A court will reform the contract if there is clear and convincing evidence that the clause in question does not reflect the true intent of the parties. (c) A court will reform the contract if a preponderance of the evidence indicates that that the clause in question does not reflect the true intent of the parties. (d) A court will invalidate the contract in its entirety.
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