UNIT 12 CONTRACTS LIST OF WORDS breach of contract contractor breach of trust action in tort judgment valuable consideration offer

and acceptance offeror/offeree counter offer original to claim damages to award damages actual/compensatory damages incidental damages consequential damages punitive/exemplary damages token/nominal damages to be legally bound court of Equity legal capacity duress to enforce an enforceable contract specific performance binding subject matter of the contract an express contract an implied contract validity of the contract inducement a party to a contract remoteness remedy injunction a third party assignment of rights assignee delegation of rights delegate a prenuptial agreement/prenup Consultancy agreement Distribution agreement Franchise agreement Loan agreement Manufacturing licence agreement Directors service agreement

size of work and labour under seal

draft gaming joint period verbal void

c)

to

avoid celebrate/award close/effect initial perform rescind break/infringe

a contract

Ex. 5. Complete the sentences using an appropriate form of the words in bold. 1. contract a) It's one of the ______ terms that you work only for this company. b) They are ______ bound to finish this work. c) They might try to take legal action against you if you break the terms of the ______. d) The ______ has told me the office will be ready by next month. 2. accept a) I ______ full responsibility for the failure of the plan. b) Clearly we need to come to an agreement that is ______ to both parties. c) This idea rapidly gained ______. d) Im sorry but this proposal is totally ______ to us. 3. offer a) They are asking one hundred and eight thousand for the place, so I put in an ______ of one hundred and seventy. b) We are now ______ you the chance to buy the complete set of pans at half price.

Ex. 1. Look through the following list of words, make phrases and give their Russian equivalents. Use dictionary if necessary. a) of beneficence form of guarantee of insurance contract of purchase/sale b) certain absolute cash contract continuing

contract

c) Its an organization that ______ free legal advice to people on low incomes. 4. trust a) Under the terms of the ______ he receives interest on the money, but he cannot get at the money itself. b) You shouldn't be so ______ people take unfair advantage of you. c) He can't be ______ with much responsibility yet he's still very inexperienced. 5. negotiate a) The salary is ______ so how much do you think I should ask for? b) He is one of the best ______ Ive ever met. c) Unfortunately, ______ with the union have broken down. 6. restrict a) They have imposed ______ on the sales of certain electronic goods. b) Such ______ trade practices are not in the public interest. c) Im afraid access to this information is ______. Ex. 6. Match the words with their definitions. contract, transaction, contractor, judgement, promise, compel, sue, damages, remedy, injunction 1. Money which is paid to someone by a person or organization who has been responsible for causing them some injury or loss. 2. A legal decision; order or sentence given by a judge or a law court. 3. An official order given by a court of law, usually to stop someone from doing something. 4. A legal document that states and explains a formal agreement between people or groups, or the agreement itself. 5. To force someone to do something. 6. A piece of business, deal. 7. To take legal action against a person or organization, esp. by

making a legal claim for money because of some harm that they have caused you. 8. A way of solving a problem or instructing someone to make a payment for harm or damage they have caused, using a decision made in a court of law. 9. An agreement to do or not to do something. 10. One of the parties to a contract. Ex. 7. To show that you understand the words in Ex.6, choose the best word to complete the following sentences. 1. He was so furious about the accusations in the letter that he threatened to ______. 2. She is seeking an ______ banning the newspaper from publishing the photographs. 3. The new circumstances ______ a change in policy. 4. We have pursued and exhausted all possible ______ for this injustice. 5. I'll try to get back in time but I'm not making any ______. 6. Each ______ at the foreign exchange counter seems to take forever. 7. The police have been ordered to pay substantial ______ to the families of the two dead boys. 8. The law regarding contracts in general is to be found in ______ made by courts. 9. Under English law a ______ cannot enforce an agreement against another party if the agreement was to commit a crime. 10. Whatever happens dont sign any ______ before you have examined its conditions in detail. Ex. 8. Supply an appropriate preposition. 1. There are many kinds ___ unwritten agreements ___ people which the law ___ most countries describes as contracts. 2. There are many everyday transactions which most people never think ___ as contracts. 3. The problem ___ unwritten contracts is that it may be very difficult to show evidence ___ the agreement you made.

4. Contracts made ___ the benefit of a third party may be enforceable ___ the third party. 5. The law regarding contracts ___ general is to be found ___ judgements made ______ courts. 6. The parties must agree to contract ______ certain terms that is, they must know what they are agreeing ______. 7. ___ a contractual dispute, certain defences ___ the formation ___ a contract may permit a party to escape his/her obligations ___ the contract. 8. Legal systems have rules ___ interpreting contracts ___ which one or more contractors made a mistake. 9. A court will award damages only ___ loss closely connected ___ the defendant's breach. 10. A plaintiff may also ask the court to award an injunction ___ the defendant. TEXT 1 Forms of contracts

Many people think of a contract as of a written agreement between people stating the exact details of promises they have made to each other. However, not all contracts are written. Some of the agreements are written, some are oral, and some are implied. The validity of the contracts did not always depend on their being in writing. It would be correct, therefore, to conclude that many contracts do not have to be in writing to be enforceable. Sometimes, of course, it is desirable to reduce a contract to writing so that the terms are clear to all parties. According to laws applicable in most jurisdictions today, six types of contracts must be in writing to be enforceable: contracts not to be completed within one year, contracts for the sale of land, contracts for the sale of goods of a certain sum or more, contracts of executors and administrators, a guaranty of debts or wrongdoing of another, and contracts in consideration of marriage. Just what is meant when the statute states that the agreement must be in writing? The agreement should be intelligible. It may be embodied in letters, memos, telegrams, invoices, and purchase orders sent between the parties. It may be written on any surface suitable for the purpose of

recording the intention of the parties, as long as all the required elements are present. To be absolutely complete, a written agreement, or memorandum, as it is often called, should contain the following elements: terms of the agreement, identification of the subject matter, statement of the consideration promised, names and identities of the persons to be obligated, and the signature of the party sought to be bound to the agreement. A writing may be acceptable and enforced even though it omits or does not correctly state some material terms (price, terms, and place of payment; terms of delivery; and other factors) agreed upon by the contracting parties. To be enforceable, only the following must be shown in a writing: * proof of the contract intent, * quantity ordered, * names of parties, and * the signature of the party sought to be bound to the agreement. In fact, the vast majority of contracts that are entered into every day are oral. There are many kinds of unwritten agreements between people which the law of most countries describes as contracts. They may continue buying and selling things for years by relying on trust and common sense, and if sometimes there is a disagreement for example, a supplier fails to deliver goods by the time he said he would they manage to deal with the problem simply by discussion. However, if the disagreement becomes so serious that they cannot resolve it, they may decide it is necessary to take legal action. One of the most common kinds of legal action is to claim that a contract has existed and that one of them is in breach of contract (has broken the agreement). To win such an action it is necessary to show that the agreement can indeed be described as a contract. There are many everyday transactions which most people never think of as contracts. When you buy a newspaper you simply pick up the paper, pay the price and walk away. But suppose something unusual happens perhaps, you discover that the newspaper is not todays but last weeks; or there are some pages missing; or the newspaper seller charges you more money than the price written on the newspaper and tells you this is because his transport costs have increased. You may then start to think

about what kind of transaction you made in buying the paper and what your rights are. The problem with unwritten contracts is that it may be very difficult to show evidence of the agreement you made. Can you prove that you bought the newspaper where you did, and not somewhere else? Can you prove how much you paid for it? If the seller claims that you agreed to buy an old newspaper, can you disprove his claim? Of course, problems of evidence can arise even when there is a detailed written agreement. Indeed a court of law may decide that the contract consists not just of the written document you possess but includes things that were said but never written down. The contract may even include things that the contractors understood but never talked about. Sometimes an agreement turns out to be a contract even though the persons who made it did not realize this at the time. And sometimes people make agreements which they think are contracts, but when they try to take legal action the court declares that no contract was ever made. In such a case they may find there is another legal claim they may make, such as an action in tort or in breach of trust. It is therefore important to know just what the law considers a contract to be. In many systems of law there is a written legal code stating exactly what is required to make a contract and what the rights and obligations of contractors are. In case law systems, there is no one code or law defining what a contract is. The law regarding contracts in general is to be found in judgments made by courts and even in legal textbooks. But there are statutes which clarify the law. 1. What forms of contract are discussed in the text? Give examples. 2. What is meant when the statute states that the agreement must be in writing? 3. What types of contract must be in writing to be enforceable? 4. What elements should written contracts contain? 2. Is there any difference between contracts and agreements? Explain. 3. Do you think of unwritten agreements as contracts? Why, why not? 4. What problems can arise with both types of contract? Give your reasons.

5. Why is it important to know what the law considers a contract to be? TEXT 2 Essential elements of contract

A contract is an agreement which is made between two or more parties and which is binding in law. In order to be binding in law the agreement must include an offer and an acceptance of that offer. The parties must agree to contract on certain terms that is, they must know what they are agreeing to (but they need not know that their agreement can be described in law as a contract). They must have intended to be legally bound; there would be no contract if, for example, they were just joking when they made the agreement. And valuable consideration must have been given by the person to whom a promise was made. In this case, consideration is a legal word to describe something a person has given, or done, or agreed not to do, when making the contract. When a court is deciding if a contract has been made, it must consider all these elements. In common law countries, the judge will be guided by decisions made in previous cases. If the judge is dealing with a problem which has never arisen before he must make a decision based upon general legal principles, and this decision will become a precedent for other judges in similar cases in the future. The most important principle guiding a judge is whether a reasonable observer of the agreement would decide that it was a contract. But sometimes decisions seem very technical because lawyers try to explain why a decision has been made, even when that decision appears to be obvious common sense. Of course exact explanations are even more important when the decision does not appear to be common sense! One principle of contract law mentioned above is that there must be offer and acceptance. An advertisement to sell something is not normally considered an offer. If I see an ad in a newspaper offering to sell a car, and I telephone the advertiser and agree to buy it, the seller is not obliged to sell it to me. This is because the law considers that the real offer is when I contact the seller asking to buy the car. The seller may then decide whether to accept or reject my offer. This is the reason a store does not have to sell you goods it displays for sale. (If the seller does accept then one important element of a contract has been made, and if the other elements exist the

seller may have an obligation to the buyer). Another principle is that the terms being offered and accepted must be certain. However, in the 1932 case of Hillas Company vs. Arcos it was decided that a reference to previous agreements or usual agreements might be certain enough. One more principle mentioned above is that there is no contract if one of the parties did not intend to be legally bound. This is supported by a case decided in 1605 (Weeks vs. Tybald) when a man joked that he would pay money to any man who would marry his daughter. What is valuable consideration? The principle behind this phrase is that the law will not enforce an empty promise. For example, if a man offers to wash my car for $10 and I accept, but he goes away and never washes it, I will probably not be able to make him keep his promise unless I have already paid the $10. This is because I have given no consideration: I have not done anything or lost anything because of his offer. However, even if I havent paid, I may still have given some kind of valuable consideration. For example, perhaps I left the car at home because of his offer to wash it and took a taxi to work. In this case a court might consider that there was an enforceable contract. As a result, I would be able to compel the man either to wash the car or to pay me the taxi fare I had spent. One very important form of consideration is an agreement not to sue someone. For example, my neighbor makes so much noise that I cannot sleep at night. I have the right to take legal action against her (perhaps in tort) but I agree not to do so because she offers to take my mother on vacation to Hawaii. If she then fails to take my mother to Hawaii she is breaking a contract with me and I could take action against her either for breach of contract, or for the original tort. In making my choice I would consider which action would be of most benefit to me. Most systems of law have similar requirements about offer and acceptance, legal intention, and consideration. They also consider the capacity of the contractors; that is, whether they were legally entitled to contract. In English law there are some special rules if one of the contracts is a company, rather that an individual, under the age 44 of 18, or insane. Legal systems have rules for interpreting contracts in which one or more contractors made a mistake or was pressured or tricked into making an agreement, and rules for dealing with illegal contracts. For example, under English law a contractor cannot enforce an agreement against another party

if the agreement was to commit a crime. 1. Define the word contract and its main elements. 2. Speak on the principles of contract law. 3. Explain the capacity of the contractors. TEXT 3 Legal remedies for a breach of contract

Once a court decides that there has been a breach of contract, it must then judge how the party in breach must compensate the other party. Injured parties may seek damages by showing that by relying on the contract. Damages describe money awarded to parties who have suffered injury to their legal rights by others. The court must be satisfied that there was a contract, that one party is in breach, and that the other party has suffered some loss because of the breach. In addition to financial loss a plaintiff sometimes tries to claim damages for mental distress caused by the breach of contract. Such claims are less successful in Britain than in the U. S., except for holiday contracts (though often successful in tort actions). A court will award damages only for loss closely connected with the defendant's breach. For example, in the 1949 English case of Victoria Laundry vs. Hewman Industries, the defendants were five months late in delivering a new boiler for the laundry. The laundry claimed damages first for profits they probably have made by being able to increase their regular laundry customers if they had the boiler on time; and second, for profits they might have made if the boiler had enabled them to take on new dyeing contracts. The courts decided that the first claim was reasonable, but that the second was too remote. Remoteness is an important concept in both contract and tort. In deciding just how much in damages to award, courts try to put the plaintiff into the same financial position that he would have been in if the defendant had carried out the contract properly. Damages are of different kinds, and the nature of a claim usually determines what type of damages will apply. A sum of money equal to the real financial loss suffered by the injured party defines actual damages. Since they are intended to compensate the injured party, actual damages are also called compensatory damages. Thus, damages awarded for non-delivery of promised goods or services

would be an amount equal to the difference between the price stated in the contract and what the promise would have to pay elsewhere. Incidental damages and consequential damages are awarded for losses indirectly, but closely, attributable to a breach. Incidental damages cover any expenses paid out by the innocent party to prevent further loss. Consequential damages result indirectly from the breach because of special circumstances that exist with a particular contract. To recover consequential damages, the injured party must show that such losses were foreseeable when the contract was first made. Damages awarded in excess of actual, incidental, or consequential damages where it is shown that the wrongful party acted with malicious intent and wilful disregard for the rights of the injured party are punitive damages, also called exemplary damages. Token damages awarded to parties who have experienced an injury to their legal rights but no actual loss are nominal damages. In todays practice, the award is usually one dollar. Instead of damages, a plaintiff sometimes asks the court to force the other contractor to carry out the contract. In English law this is called specific performance. The court will not agree to do this if it causes hardship to the defendant, however, or if it is no longer possible or practical to carry out contract. Sometimes the court decides to award damages instead of specific performance, and sometimes it awards both. A plaintiff may also ask the court to award an injunction against the defendant, that is, to order the defendant not to do something which would be in breach of contract. Specific performance and injunctions are remedies which were developed by the courts of Equity because of inadequacies in the Common courts. Contract law is a central part of legal systems all over the world. It is especially important in international business, where the parties try to specify all the parts of their agreement in a clear written contract so that differences of law and custom between their countries can be avoided. It is sometimes said that some societies are much more "contractual" than others. For example, in the United States people are accustomed to signing contracts connected with daily life. Some people even draw up a contract with a girlfriend or boyfriend when they start living together in the hope of reducing arguments if they part later. On the other hand, Japanese people rarely even sign contracts of employment when they take a new job, believing that custom and social obligation will be enough to resolve any

differences. Perhaps it is not a question of one society being more contractual than another, but rather that in some societies people are more likely to use lawyers and courts to sort out their disagreements, and they therefore feel the need to have precise evidence of their agreements in the form of written contracts. 1. Define damages and speak on their different types. 2. Discuss other remedies for a breach of contract given in the text. 3. Compare these remedies with those existing in your jurisdiction. 4. Prove that contract law is especially important in international business. 5. Explain the following: Some societies are much more contractual that others. Is it typical in your country to sign contracts connected with daily life? Ex.13. Link the type of contract to its description. Consultancy agreement, Distribution agreement, Franchise agreement, Loan agreement, Manufacturing licence agreement, Terms and conditions of sale agreement, Contract of employment, Directors service agreement, Shareholders agreement 1. This agreement is used to insure the repayment of money borrowed, usually in monthly installments. 2. This agreement is used where one party buys goods from the manufacturer and re-sells them on his own account. He will however be given the right to use the manufacturers intellectual property rights. 3. This agreement sets out the terms and conditions on which a business supplies goods. 4. This agreement is used where one party grants to another the right to run a business in the name of the first party. 5. This is the equivalent of a contract of employment for directors. 6. This agreement is used where one party is providing services as an independent advisor to a company. 7. This agreement should be used where one party (the licensor) owns intellectual property rights in respect of a product it has developed and wishes to license the manufacture of the product to a third party. 8. This is intended to govern the relationship between a number of

shareholders in a company. The agreement works as a second layer of protection preventing the company from being run in a manner other than has been agreed. 9. This contract comes into existence as soon as a job is accepted whether that offer is oral or in writing.