Chapter 7.doc

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MGMT 3320
Joseph Radocchia

Chapter 7 – The Terms of a Contract The Content of a Contract Terms Contractual term can be expressed or implied Express Terms A provision of a contract that states a promise explicitly Ex. Price, quantity, and warranties Court assigns reasonable meaning to vague or ambiguous terms If a contract is made by one of the parties, any ambiguity in the language will be construed against that party in favor of the other. Drafter should bear the risk of unclear language If language is so ambiguous that the contract cannot be understood, the contract will fail for uncertainty, none of the promises it contains will be enforceable Rules of construction: Guiding principles for interpreting or “constructing” the terms of a contract o Implied Terms A provision that is not expressly included in a contract but that is necessary to give effect to the parties’ intention. When an event arises that is not addressed in the contract through express terms, courts may be asked to imply a term in order to give effect to the parties’ intention. Judge will do so if he is satisfied that not all of the terms that the parties intended to include in the contract were in fact included. Business Efficacy A judge is entitled to imply terms necessary to make the contract workable Previous Dealings between Parties If parties have contracted in the past, it may be possible to imply that their current contract contains the same terms. Statutory Requirements Ex. If a party delivers too many goods to another, the receiving end may accept the quantity of goods stated in the contract and reject the rest Entire Contract clause: A term in contract in which the parties agree that their contract is complete as written Implies the parole evidence rule (below) Contractual Quantum Merit: Awarding one party a reasonable sum for the goods or services provided under a contract The Parol Evidence Rule A rule that limits the evidence a party can introduce concerning the contents of the contract Rule forbids outside evidence as to the terms of a contract when the language of the written contract is clear and the document is intended to be the sole source of contractual content. Contracts can take three possible forms: Entirely Oral (i.e., conversation) Entirely Written (i.e., written contract) Both oral and written. Situations where evidence outside the contract is important and considered: If there is an alleged problem going to the formation of the contract - because one party alleges
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