Ch-4

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Business

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Feb 20, 2024

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Memorandum Date: 13 February 2024 From: Patel Ayushkumar To: Henry Lowi Re: Business Law - Chap. 4 – Exercises

True/False 1. Family members or friends who enter into unwritten business agreements with one another may have difficulty proving they intended the agreement to be legally binding. True. If there is sufficiently close relationship between the parties, such between family members, spouses or close friends, there is a presumption that the parties do not intend for their promises to be legally binding agreements. However, if there is evidence, such as a written contract it would make it easier to prove that they intended the agreement to be legally binding. (Textbook pg.108) 3. Contract law presumes businesspeople understand that their promises to one another may be enforced by courts and tribunals. True. This true because failure to fulfill your contractual obligation know as breach of contract can result in serious legal and economic consequences for you. The law presumes that the parties to a business-to-business transaction understand that the promises they make to each other carry legal consequences. That is, the law presumes that the parties to a business agreement intend that they may sue and be sued by each other if they break the promises that they have made. This presumption exists only in the context of the business world and the marketplace, not to agreements between family members or friends. (Textbook pg.109) 5. If you shake hands on the essential terms of business transaction, it will not be legally binding until a contract is written up and signed by the parties. False. The law does not require all contracts to be in writing. A mutual exchange of promises by businesspeople over lunch, confirmed with a handshake and an intention to be bound, can constitute a binding contract, provided that the agreement is legal and represents a meeting of minds. Unless the business transaction involves either of these: the sale or leasing of land, guarantor of a payment. (Textbook pg.112) 7. If an essential term of a contract is not precise and results in a contractual dispute that ends up in court, the plaintiff’s subjective interpretation of the term will always prevail. False. “If a dispute arises, the most convenient resolution is to find a solution within the language of the contract itself. The parties may need to look at the courts as a last resort in settling their contractual difference.” The court will use the “Rules of construction” to interpreting the dispute contracts. (Textbook pg.114) 8. Standard form contracts are one-sided and will not be enforced by the courts. False. “Standard form contract is a contract that is drafted by one of the parties and imposed on the other with little or no opportunity for negotiation.” The courts will not enforce a standard form contract but will when call upon to do so; strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract. (Textbook pg.115)

MCQ 1. Leigh Miller operates a coffee shop called Coffee Crazed in a trendy area of town. She wants to change coffee suppliers and recently met with Juan Carlos, a sales representative for Columbia Coffee Beans Wholesale Supply Ltd, to discuss the company’s products and prices. She agrees to purchase a six-month supply of coffee beans. Which of the following is not an essential term of the contract? a. Price per unit of the coffee beans. b. Payment and delivery terms. c. Signatures of the parties . d. Description of the quality standards for the coffee beans. In the above case, Leigh Miller agrees to purchase a six-month supply of coffee beans orally. This is called a verbal agreement or an oral contract, which doesn’t involve any kind of writing. Signature of the parties are only required in some forms of written contract. (Textbook pg.112) 2. f two sophisticated businesspeople enter a standard form contract, and one of them later wishes to withdraw from it because the terms are one-sided and unfair, a judge will generally: a. Allow the aggrieved party to withdraw from the contract. b. Enforce the contract. c. Add additional terms into the contract to make them fair. d. Change the terms of the contract to make them fair. “Although standard form contracts tend to be one sided, and some of the standard terms may appear to be unfair, these contracts between businesses are just as enforceable as contracts that are the product of extensive negotiation.” (Textbook pg.115) 4. Which of the following is an example of a liquidated damages clause? a. “This contract will automatically terminate in the event that the purchaser orders less than the quota for four consecutive weeks.” b. “If the supplier fails to deliver the weekly supply of products to the retailer on or before the first day of each week, the supplier shall pay the retailer $100 for each day that the delivery is late.” c. “The supplier shall not be liable to the retailer in respect of any losses, damages, costs, or claims resulting from circumstances that are not within the control of the supplier.” d. “This is the entire agreement between the parties, covering everything agreed or understood in connection with the subject matter of this transaction. No oral promises, conditions, warranties, representations, understandings, or interpretations were relied on by either party to execute this contract.” A liquidated damages clause allows parties to a contract to set an amount to be paid upon a specified breach of the contract. Reliance on a liquidated damages clause in a contract means the parties should not need to prove the foreseeability and number of damages. For example, a contract that specifies a deadline for delivering a product or service may also contain a clause that states a sum that will become owing if a party fails to meet the deadline. (Textbook pg.126)

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5. A party to a contract might choose to include a condition subsequent clause in a contract: a. if there is a risk of forfeiting a deposit if a deadline is missed. b. if it does not want to be bound to the terms of the contract if a certain situation arises . c. to avoid the high cost of litigation if the contract is breached. d. to ensure any dispute will be resolved according to the law in a designated jurisdiction. “A business may choose to include a condition subsequent in a contract if it is certain in advance that it no longer wishes to be contractually bound to a business arrangement if a particular circumstance arises.” (Textbook pg.130) 6. If a term in a contract is ambiguous and the parties disagree on its meaning, how will a judge resolve the dispute? a. By applying the interpretation of the party who drafted the contract. b. By applying the interpretation of the party who commenced the lawsuit. c. By applying their own subjective interpretation of the term. d. By applying the interpretation of a reasonable person. According to the rule of construction of Apply an objective test, If the parties have used a vague term, such as “durable,” in defining, the judge might consult a dictionary or be guided by earlier decisions of other courts about the meaning of similar words but would probably not be concerned with what the parties themselves think “durable” means. Judges act on the principle that contracts should be strictly enforced according to the ordinary meaning of the words chosen by the parties themselves. (Textbook pg.114)

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