Common Law Commercial Contracts: A Guide to Understanding and Drafting – Content

Table of Contents

Preface

Disclaimer

Chapter 1 Contracts and the Common Law

What does the term common law mean?

The approach of the common law

Contract law in the United Kingdom

Contract law in the United States

What is the effect of a contract?

How does a contract come into effect under the common law?

Are there different types of contract in the common law?

Simple contracts

Speciality contracts

E-commerce transactions

Can everyone enter a contract?

What is an implied contract?

What is the difference between bilateral and unilateral
contracts?

Are there any restrictions on the subject matter of a contract?

Contract Drafting

What is the purpose of a written contract?

What is the role of the drafting lawyer?

What is the role of the lawyer in the contract negotiations?

What should be the aim of the lawyer when drafting the ~contract?

Communication is vital

Where possible use a model/precedent contract

Avoid legalese

What to do with pronouns – him and her

Draft in the present tense

Use headings and organize the contract in a clear logical
manner

Which party’s lawyer drafts the contract?

What does the non-drafting lawyer acting for the other
party do?

It is important for the lawyer to keep an organized file

Chapter 2 Contract Formation – Offer

The notion of offer in contract law

What is an invitation to treat?

Case law demonstrating the distinction between an offer and an invitation to treat

Is an advertisement an offer?

Is the nature of the transaction important when distinguishing between an offer and an invitation to treat?

Who can make an offer?

When can an offer be withdrawn?

Is it possible to withdraw a unilateral offer made to the world?

What happens if acceptance takes place after the offeror dies?

Contract Drafting

Principles of contract drafting

How contracts are organized

Basic rules of contract interpretation

The Contract

Specific Contract Clauses

Identifying the contract and the parties – comments

Identifying the contract and the parties – drafting

Specific Contract Clauses

Representations and warranties clause – comments

Representations and warranties clause – drafting

Chapter 3 Contract Formation – Negotiations

The status of statements such as subject to contract

What is the status of a Letter of Intent: invitation to treat or binding offer?

When is an LOI relied on?

The approach of the common law courts to LOIs

So what advice for the drafting lawyer?

Contract Drafting

Principles of contract drafting

Drafting a Letter of Intent

Issues to be taken into consideration when drafting a
Letter of Intent

Checklist of matters to be mentioned in a Letter of Intent

The Contract

Sample Letter of Intent

Sample Letter of Intent

Draft Letter of Intent – first version

Revised letter of intent – second version

Chapter 4 Contract Formation – Acceptance

When does acceptance occur?

Who decides the manner of acceptance?

Acceptance by post – the postal rule

Does the postal rule apply to modern forms of
communication?

What is the effect of a counteroffer on the original offer?

Is a request for information a counteroffer?

Can you accept an offer of which you have no knowledge?

Acceptance in cases of conflicting standard terms – the battle
of the forms

Contract Drafting

Principles of contract drafting

Avoid ambiguity

Always use time references

When should shall be used?

What do lawyers mean when they use “shall”?

So when can “shall” be used?

Other drafting tips – avoid accretive drafting

Precision

The Contrac

Specific clauses in the contract

Recitals – comments

Recitals – drafting

Specific clauses in the contract

Definitions – comments

Definitions – drafting

Chapter 5 Contract Formation – Consideration

What is consideration?

Exceptions to the rule on consideration

Common law rules defining the scope of the consideration doctrine

The consideration offered by the parties need not be adequate but it must be sufficient

The consideration must not be something that one is
already bound to do

Past consideration is not good consideration

Consideration must move/come from the promisee

Payment of a lesser sum will not be considered good consideration as satisfaction for the whole debt, i.e.
part payment of a debt does not extinguish the duty
to pay the entire amount owed

What is the doctrine of promissory estoppel?

Recent developments concerning promissory estoppel and the notion of consideration

Contract Drafting

Principles of contract drafting

What is the reasonableness standard?

Example – Advertising costs

Example – Product evolution

The Contract

Specific clauses in the contract

Object of the agreement – comments

Object of the agreement – drafting

Specific clauses in the contract

Duration of the contract – comments

Duration of the contract – drafting

Chapter 6 Intention to Create Legal Relations and the Doctrine of Privity of Contract

Intention to create legal relations

Domestic agreements

Commercial agreements

What is privity of contract?

The Contract (Rights of third parties) Act, 1999

Contract Drafting

Principles of contract drafting

The notion of materiality

Other circumstances in which the notion of materiality
can be used

The Contract

Specific clauses in the contract

Limitation of third party rights – comments

Limitation of third party rights – drafting

Specific clauses in the contracts

Cooperation between the parties – comments

Cooperation between the parties – drafting

Specific clauses in the contract

Payment clause for an independent agent –
comments

Payment clause for an independent agent –
drafting

Specific clauses in the contract

Payment clause for non-independent agent –
comments

Payment clause for non-independent agent –
drafting

Specific clauses in the contract

Price escalation clause/value maintenance clause – comments

Price escalation clause/value maintenance clause – drafting

Issues to be taken into account when drafting comfort letters

Chapter 7 Contract Terms

Distinguishing between representations and terms

Types of contracts – express contracts and implied contracts

Express contracts

Implied contracts

Are there different types of contract terms?

Contract Drafting

Principles of contract drafting

Duties of the parties – what is the standard that will apply
to the parties’ behavior: good faith/best efforts?

The Contract

Specific clauses in the contract

Standard to be applied when establishing the scope
of a duty – comments

Standard to be applied when establishing the scope
of a duty – drafting

Specific clauses in the contract

Entirety clause/Status of the Agreement clause/
Merger clause – comments

Entirety clause/Status of the Agreement clause/
Merger clause – drafting

Chapter 8 Clauses Restricting Liability

Exemption clauses

Control by the courts

Parliamentary control

Legislation adopted by the UK Parliament

Exemption of liability clauses and the statutory
standard of “reasonable”

Case law on the notion of “reasonable”

Exemption clauses in the United States

Limitation of liability clauses

Liquidated damages clause

Liquidated damages clauses v penalty clauses

Contract Drafting

Principles of contract drafting

Using the formula to a degree allowed by law

Creating exceptions to previously established duties

The Contract

Specific clauses in the contract

Exemption clauses – comments

Exemption clauses – drafting

Specific clauses in the contract

Limitation of liability clause – comments

Limitation of liability clause – drafting

Specific clauses in the contract

Liquidated damages clause – comments

Liquidated damages clause – drafting

Chapter 9 The Meeting of the Minds

Mistake

Common mistake

Mutual mistake

Unilateral mistake

Misrepresentation

Fraudulent misrepresentation

Innocent misrepresentation

Negligent misrepresentation

Duress

Undue influence

Unconscionability

Illegality

Contract Drafting

Principles of contract drafting

Key phrases – Including but not limited to

On an arm’s length basis

On a consolidated basis

On the occurrence of an event

Creating the right to perform repeated actions

Respectively/as the case may be

Representations confirming the legality of the
contracting parties

The Contract

Specific clauses in the contract

Non-competition clause – comments

Non-competition clause – drafting

Specific clauses in the contract

Confidentiality clause – comments

Confidentiality clause – drafting

Specific clauses in the contract

Invalidity clause/severability clause – comments

Invalidity clause/severability clause – drafting

Specific clauses in the contract

Savings clause (blue pencil clause) – comments

Savings clause/blue pencil clause – drafting

Chapter 10 Discharge of Contract

What occurs if one of the parties invalidly terminates the agreement?

How may a contract be legally discharged?

Contract Drafting

Principles of contract drafting

Legalese and contract drafting

Here, there and everywhere

“Here” adverbs

“There” adverbs

“Where” adverbs

Other examples of legalese

The Contract

Specific clauses in the contract

Force majeure – comments

Force majeure – drafting

Specific clauses in the contract

Hardship clause – comments

Hardship clause – drafting

Specific clauses in the contract

Intellectual property clause – comments

Intellectual Property clause – drafting

Specific clauses in the contract

Choice of law clause – comments

Choice of law clause – drafting

Specific clauses in the contract

Resolution of Disputes – comments

Resolution of disputes – drafting

Specific clauses in the contract

Time is of the essence clause – comments

Time is of the essence clause – drafting

Specific clauses in the contract

Service of process clause/service of suit clause – comments

Service of process clause/service of suit clause – drafting

Specific clauses in the contract

Assignment and Transfer of Rights – comments

Assignment and Transfer of Rights – drafting

Specific clauses in the contract

Non-waiver clause – comments

Non-waiver clause – drafting

Chapter 11 The Remedies Available for Breach of
Contract

Remedy supplied by the parties

Release and waiver of liability clause

Hold harmless and indemnification clause

Liquidated damages clause

Exclusion of liability for specific damages

Common law remedies for breach of contract –
compensation

Different types of damages available at common law

Nominal damages

Compensatory damages

Punitive damages

Restitution

Limits imposed on the damages that may be payable

Causation

Remoteness

Mitigation

Equitable remedies for breach of contract

Specific performance

Injunctions

Statute of limitations – time limits for bringing actions

Applicable time limits

When does the statute of limitations clock start ticking?

Time limitations on actions taken in equity

Contract Drafting

Principles of contract drafting

Checklist of things to consider at the closing

Identification of the parties

Recitals

Definitions

Legal consideration

Object of the agreement

Relationship between the parties – statement of
work (SOW)/business ethics clause

Duties of the parties

Duration/term of the contract

Price and payment

Representations and warranties

Exchange of proprietary information

Allocation of intellectual property clause

Liability

Termination of the contract

General issues

Signing the contract

The Contract

Specific clauses in the contract

Release and waiver of liability clause – comment

Release and waiver of liability clause – drafting

Specific clauses in the contract

Indemnity clause/hold harmless clause – comment

Indemnity clause/hold harmless clause – drafting

Specific clauses in the contract

Knock for knock clause – comment

Knock for knock clause – drafting

Specific clauses in the contract

Exclusion of liability for specific damages clause – comment

Exclusion of liability for specific damages clause – drafting

Specific clauses in the contract

Legal fees clause – comment

Legal fees clause – drafting

Specific clauses in the contract

Signing blocks – comment

Signing blocks – drafting

Sample Contract Clauses

Glossary of Technical Terminology

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