3

5
4
1
2
 Key terms: Defences to contract formation
Match these defences (1-4) with their definitions (a-d).
1 illegality of the subject matter c
2 fraud in the inducement d
3 duress b
4 lack of legal capacity a
a when one party does not have the ability to enter into a legal contract, i.e. is not of
legal age, is insane or is a convict or enemy alien
b when one party induces another into entering into a contract by use or threat of force,
violence, economic pressure or other similar means
c when either the subject matter (e.g. the sale of illegal drugs) or the consideration of a
contract is illegal
d when one party is intentionally misled about the terms, quality or other aspect of the
contractual relationship that leads the party to enter into the transaction

Text analysis: Understanding contracts

Lawyers are usually involved at the formation stage of a contract, which includes advising,
drafting and negotiating. Drafting is commonly carried out with the help of contract
templates or forms. Nevertheless, legal counsel must advise on the inclusion or omission of
clauses and their wording. To do this, familiarity with common clause types and the language
typically used in them is necessary.
3.1 Match these types of contract clauses (1-10) with their definitions (a-j).

1 Acceleration a clause stating that the written terms of an agreement may not be varied
2 Assignment by prior or oral agreements because all such agreements have been
3 Confidentiality consolidated into the written document 7
4 Consideration b clause designed to protect against failures to perform contractual
5 Force Majeure obligations caused by unavoidable events beyond the party's control,
6 Liquidated Damages such as natural disasters or wars 5
7 Entire Agreement1 c clause outlining when and under which circumstances the contract may
8 Severability be terminated texto
9 Termination d clause concerning the treating of information as private and not for
10 Payment of Costs distribution beyond specifically identified individuals or organisations, nor
used other than for specifically identified purposes 3
e clause in a contract requiring the obligor to pay all or a part of a payable
amount sooner than as agreed upon the occurrence of some event or
circumstance stated in the contract, usually failure to make payment 1
f clause setting out which party is responsible for payment of costs related
to preparation of the agreement and ancillary documents texto
g clause expressing the cause, motive, price or impelling motive which
induces one party to enter into an agreement 4
h clause referring to an amount predetermined by the parties as the total
amount of compensation a non-breaching party should receive if the
other party breaches a part of the contract 6
i clause prohibiting or permitting assignment under certain conditions 2
j clause providing that, in the event that one or more provisions of the
agreement are declared unenforceable, the balance of the agreement
remains in force texto
1 (US) also Merger (The term Paro/ Evidence is used in both the UK and the USA.)

Unit 5 Contracts: contract formation �

 If the non-
compliance is due
to a reason alien to
subjects, they won’t
be responsible

assignment

responsability to pay compensation

the party alone can decide

carry out later or even cancel

the agreement must be in written form

the operator fails in something

do nothing

attachements

considered
 17.3 Franchisee covenants that, unless otherwise approved in writing by Franchisor,
Franchisee shall not, for a continuous uninterrupted period commencing upon the
expiration or termination of this Agreement (regardless of the cause for termination),
�i-M ----�---=-��.;...;.�-
"""' and continuing for two (2) years thereafter (and in the case of any violation of this
COVenant, for o (2) years after the violation ceases), either directly or indirectly A i,,;t wo(d� - "'"'"'
-�,---�"I" W..1",}
for himself, or through, or on behalf of, or in conjunction with any person, partnership, 0.,.,, tu"'\
corporation, limited liability company or other entity, own, operate, maintain, or
�•� to Allow elit.,_1-
engage in, be employed by, or provide assistance to, or have any interest in (as ro �.Vl }>.,v,.t;h/l \nt(Yl<;\'>,'
owner or otherwise) any business that: (a) offers products or services which are ,;1wlo<4f"'t ,;t"l' hh" h'OI¾
l<>l•\)i"i) si<M� In ?<"11IIM
the same as or similar to the products and services offered by the Franchised "°'"IM"i� I" wkir..11. he h.iw
Business under the System and (b) is, or is intended to be, located at or within a "" mfl�o<ee o� <lulGio•�
. twenty-five (25) mile radius of the Approved Location or of any other Franchised
10-""ll----'----'-
Business under the System.

12.2 With a partner, summarise what the above clause says in everyday language, as
you did in Speaking A in this unit. What changes did you make in word choice and
sentence structure?
12.3 Write the email to the client as requested by Randell, referring to the attached
reworked clause and explaining what it means. Look at Section 9 (Understanding
legalese) in Unit 3 for guidance on simplifying the style of language used in the clause.

Unit 5
To improve your web-based research skills, visit www.cambridge.org/elt;ile2, click on Research
Tasks and choose Task 5.

Unit 5 Contracts: contract formation �