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Contract formation – offer
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Part 1 – information
Not all agreements are binding in law. In order for an agreement to be considered a contract and binding, certain conditions must be met. One of the fundamental requirements for the existence of a contract in the common law is to show that a meeting of the minds between the parties to the agreement took place. This is referred to technically as consensus ad idem. A meeting of the minds is said to take place when there is a clear offer made by one party and thereafter unconditional acceptance of that offer by the other party. The absence of one or both of these two elements will lead the courts to find that there is no binding/enforceable agreement between the parties. Consequently, the first essential element for the formation of a contract is the existence of an offer made to the offeree.
The notion of offer in contract law
It is a basic principle of the common law that legally binding acceptance cannot occur if the offer is not sufficiently clear or precise.
Case Study: Scammell v Ouston1
Facts: Ouston accepted to buy a van from Scammell. Under the agreement, Ouston was to make a payment of a specified sum as a deposit with “the balance of the purchase price to be paid on hire purchase terms”. However, the precise nature of these terms was not specified in the agreement.
Held: In the opinion of the Court, no precise meaning could be attributed to the phrase (offer) on hire purchase terms, as the subsequent hire purchase agreement could take any form with varying interest rates. As there had been no previous dealings between the parties (which could have allowed the court to infer the potential hire purchase terms) it was thus impossible, in the opinion of the Court for acceptance to take place on the basis of such a general statement of terms.
If a statement is lacking the necessary detail to be considered an actual offer, it may instead be considered to be invitation to treat.
What is an invitation to treat?
An offer must be distinguished from an invitation to treat.2 An invitation to treat is an indication by one party that it is interested in doing business with another party and by this expression of interest is inviting the other party to make an offer. Thus, an invitation to treat falls short of being an offer and consequently acceptance of an invitation to treat by the party to whom it is addressed will not give rise to the formation of a binding contract between the parties. Instead the acceptance will probably be qualified as an actual offer, which the maker of the invitation to treat is then free to accept or not.
It is not always easy to distinguish an invitation to treat from an actual offer. As is the technique of the common law, each case is judged on its facts. When trying to distinguish between the two notions, the courts often employ an objective test, i.e. they do not look to the intention of the person making the offer, rather they ask themselves whether a reasonable man, looking at the facts of the case, would think an offer or an invitation to treat had been made. Thus, the analysis is effectively carried out from the point of view of a disinterested third party.
Case study: Pharmaceutical Society of Great Britain v Boots Chemists3
Facts: The UK Pharmacy and Poisons Act, 1933 provided that the sale of certain medicines/drugs had to be “effected by or under the supervision of a registered pharmacist”. Boots Chemists operated a self-service shop in which certain of the medicines coming within the terms of the Pharmacy and Poisons Act were freely available in the shopping aisles of the shop with their price displayed. The Pharmaceutical Society brought Boots to court on the grounds that they were selling the drugs in breach of the provisions of the Pharmacy and Poisons Act, i.e. that they were selling the drugs outside the supervision of a registered pharmacist. In the opinion of the Pharmaceutical Society, the goods were offered for sale at the time they were displayed on the shop shelves and the offer was accepted at the time shoppers placed the goods in their shopping basket; thus it was at this moment the sale took place even if actually payment occurred later at the checkout. Boots however contended that they were not offering the goods for sale when they placed the products on their shop shelves but were making an invitation to treat. In their opinion, the sale occurred not at this time but at the moment the goods were brought to the checkout, at which time the customer made an offer to buy them, which offer was accepted by the checkout personnel processing the sale and at which time a registered pharmacist was present to supervise the sale in accordance with the provisions of the 1933 Act. Thus, the question before the court was whether the presentation of goods for sale on a shop shelf with the price attached amounted to:
an offer which is accepted by shoppers when they take the product and place it in their shopping trolley; or
an invitation to treat.
Held: It was the view of the Court that in presenting the drugs for sale in a self-service environment with the price attached, Boots Chemists were making an invitation to treat. When a customer presented the product at the checkout, the customer was at this time making an offer that the shop then was free to accept or reject. In the opinion of the Court, if placing the product for sale on a shop shelf with the price attached was an offer, logically once the customer placed the product in his shopping basket, the offer would have been accepted and the customer would be contractually bound to buy the product; thus he would be unable to change his mind and return the product to the shelf. However in the Court’s opinion, shoppers felt free to return the articles previously placed in their shopping basket and thus they obviously did not consider that a contract had been formed at this time.
Thus, it can be said that the Courts take a practical rather than a theoretical approach as to whether an offer or an invitation to treat has been made.
Is an advertisement an offer?
It is a general rule of the common law that an advertisement offering something for sale is not an offer but an invitation to treat. In Partridge v Crittenden4 advertising birds for sale at a specific price was not considered to be an offer but an invitation to treat.
However, an advertisement may be construed as an offer, where the advertisement is:
sufficiently precise as to the type, price and quantity of the goods for sale;
definite insofar as the offeror clearly indicates his willingness to be bound by the offer contained therein.
Case study: Carlill v Carbolic Smoke Ball Co.5
Facts: The defendant was a manufacturer of smoke balls6 and claimed that the smokeballs prevented influenza. It was so confident in its product that it placed an advertisement in a newspaper offering to pay £100 to any person who caught influenza after using the smoke balls in the prescribed manner.7 The advertisement also specified that the Company had deposited £1,000 with its bank for this purpose. The plaintiff, Mrs. Carlill bought and used the product but nonetheless caught influenza. She requested the payment of £100 compensation. The defendant refused to pay claiming that the:
unilateral character of the advertisement prevented it from amounting to an offer in law as it was not addressed to a specific person;
advertisement should not have been taken seriously given the potentially large amounts of money involved and a reasonable person should not expect a legally binding obligation to result.
Held: The Court considered that the advertisement amounted to a unilateral offer and that acceptance of the offer occurred at the moment a person bought the smoke ball and used it in the prescribed manner. Of critical importance for the Court was the fact that the advertisement expressly mentioned that the defendant had deposited £1,000 with a bank. The Court considered that this information went beyond what is normally found in advertisements and demonstrated a clear intention on the part of the defendant to be bound by the advertisement. Consequently, the Court ruled that the plaintiff should receive the promised £100 as per the terms of the defendant’s offer.
Can an offer be withdrawn?
The general rule is that an offer may be withdrawn at any time prior to acceptance. However, the revocation of the offer must be communicated to the offeree; if not then the offer will remain operative. However, even where an offer is not actually withdrawn, it will not remain open for eternity and all offers are deemed to lapse after a reasonable period of time has passed. As always, what is reasonable is considered from the point of view of the average man in the street, i.e. an objective test is applied.
Case study: Ramsgate Victoria Hotel Co. Ltd v Montefiore8
Facts: In the month of June, Mr. Montefiore offered to buy shares in a company. However, the shares were not actually allotted to Montefiore until five months later at which moment he refused to buy them (i.e. refused the acceptance of his offer by the plaintiff). Montefiore considered that over the five months his offer to buy the shares had lapsed even if he had not expressly withdrawn the offer.
Held: Taking the subject matter of the contract into account,9 in the context of the five month delay, the Court considered that the offer made by Montefiore had lapsed and that consequently the delayed acceptance did not lead to the formation of a binding contract.
Is it possible to withdraw a unilateral offer made to the world?
Withdrawal of an offer is less easy in the case of a unilateral offer that has been made to the world at large. Given that such an offer is often made to an undefined class of people, withdrawal of the offer can become complicated if not impossible. Indeed, in some cases it would be unfair if the offeror of a unilateral offer were able to withdraw the offer at any moment prior to acceptance, as is the rule with bilateral contracts. This would especially be the case if the performance by which the acceptance was to be expressed had begun or was ongoing at the time of the purported withdrawal of the offer. Depending on the facts, the courts may be willing to consider the withdrawal of a unilateral offer after performance has begun as contrary to equity. Effectively, the courts will consider the offeror as estopped or prevented from withdrawing the offer.
Case study: Errington v Errington10
Facts: A couple got married. X the father of the bridegroom made a unilateral offer to the couple to grant them ownership of a house if they continued to make the repayments on the loan taken out by him to buy the property. Subsequently, X died leaving all his property to his wife. Thereafter, the son and daughter-in-law separated and the daughter-in-law remained in the house. At all times, the couple or the daughter-in-law acting alone kept up the repayments of the loan to the bank. Some time later and before the loan was discharged, X’s widow sought as the beneficiary under X’s will to retake possession of the house. The daughter-in-law resisted.
Held: In the opinion of the Court, the daughter-in-law had an equitable right to remain in the house. X’s original promise was considered to be a unilateral offer to give the house to his son and daughter-in-law in return for the payment of the loan installments. Thus, once performance had begun, the mother was estopped from revoking the offer made by X her husband, as long as the daughter-in-law continued to repay the loan.
Alternatively, the courts ruling in common law may find that when a unilateral offer is made, in fact two offers are made: the express unilateral offer; and a second implied in law offer not to withdraw the offer once performance has begun. However, each case depends on its facts and even a unilateral offer will be considered to lapse after a reasonable period of time has passed.
Binding in law – juridiquement contraignant
To meet a requirement – remplir / respecter une exigence
A meeting of the minds – rencontre des volontés
To take place – avoir lieu
Clear offer – offre claire (ferme et précise en droit contractuel français)
Element – élément (ici, au sens de condition)
Enforceable – exécutoire
Hire purchase terms – conditions d’une location-vente/ “leasing”
To attribute – attribuer
Varying – variable
Interest rates – taux d’intérêts
Dealings – relations / transactions
To infer – déduire
Invitation to treat – invitation à entrer en pourparlers
Expression of interest – manifestation d’intérêt
To invite – inviter
To fall short (of being an offer) – idée de ne pas pouvoir être considéré comme/échouer
A party (to a contract) – partie / cocontractant
Objective test – analyse objective
Disinterested third party – tierce partie indépendante
UK Pharmacy and Poisons Act – loi sur la pharmacie et les poisons
To effect a sale – effectuer une vente
Registered pharmacist – pharmacien enregistré (profession règlementée)
Self-service shop – magasin en libre service
To come within the terms of a law – relever du champ d’application de la loi
Shopping aisles – allées commerçantes
To display – afficher
To be in breach of a contract – violer une disposition contractuelle
Provisions – dispositions
Outside – dehors (en) / extérieur
Shelf – étagère
To contend – prétendre
Check out – caisse (peut également pouvoir dire vérifier / contrôler)
To amount to – équivaloir à
Shopping trolley – caddie
Advertisement – publicité
Smoke balls – boules de fumée/charbon
Influenza – grippe
In the prescribed manner – de la manière prescrite
To deposit – effectuer un dépôt
Unilateral character – caractère unilatéral
Critical – crucial
Beyond – au-delà
Offeree – récipiendaire / destinataire de l’offre
Eternity – éternité
To lapse – rendre caduque
Shares – actions
To allot – attribuer / affecter
Later – plus tard
Subject matter – objet
To take something into account – prendre quelque chose en compte
Bilateral contract – contrat bilatéral
Ongoing – en cours
To take out a loan – souscrire un prêt
Bequeath (something) in a will – léguer quelque chose par testament
Thereafter – par la suite
To separate – séparer
At all times – à tout moment
To keep up the payments – acquitter les paiements / respecter les échéances fixées
Widow – veuf/veuve
To seek (sought) – chercher à (cherché)
Beneficiary – bénéficiaire
Will – testament
Installment – paiement / versement
To revoke – révoquer
As long as – tant que / aussi longtemps que
Part 1 – EXERCISES
Write a sentence defining each of the following terms – one sentence per term
Hire purchase agreement
Invitation to treat
Term (of an agreement)
Write sentences with the following pairs of words demonstrating your knowledge of the relationship between them
Invitation to treat/advertisement
Expression of interest/offer
3. Fill in the missing words
Using the vocabulary in Text 2, fill in the missing words
In order for an ______ to be binding in law the courts require a ______ to have taken place between the parties.
To decide whether an advertisement is an invitation to treat or an ______ the courts apply an ______ test.
An offer may be ______ at any time prior to ______.
In the Ramsgate Victoria Hotel case, shares were not ______ to Mr Montefiori until five months after he offered to buy them. As a result, the offer was said to have ______.
In order for a contract to come into existence, it is necessary to have a clear ______ and thereafter unqualified, unconditional ______ of that offer.
4. Knowledge test
The following questions may be answered in writing or by way of discussion
Do you have an equivalent to the notion of invitation to treat in your contract law system?
In Errington v Errington the mother-in-law was unable to take possession of the house despite being the legal owner. How would the courts have decided this case in your country?
The common law takes a factual legalistic approach as to whether a contract has come into existence based on whether a third party would consider a meeting of the minds to have occurred. Should the courts impose contractual obligations based on a moral consideration of whether one party should owe the other a duty?
If products are displayed in a shop with a price, do you think this should be an offer? What is the position in your legal system?
Answers Chapter 1 – Part I – Text 2 – Exercise 3
a) Agreement, meeting of the minds. b) Offer, objective. c) Withdrawn, acceptance. d) Allotted/issued, lapsed. e) Offer, acceptance.
1 1 AER, 1941.
2 Also referred to as an invitation to trade in US contract law.
3 1 AER, 1953.
4 2 AER, 1968.
5 2 AER, 1892.
6 It seems the defendant were selling lumps of charcoal as a remedy for influenza!
7 In the manner prescribed by the manufacturer as per documentation accompanying the smokeballs included with the product at the time of the sale.
8 LR 1 EX 109, 1866.
9 Here the matter concerned shares that by their nature are subject to constant price fluctuations and thus an offer as regards their purchase must be accepted almost immediately; this is an area where time is obviously of the essence.
10 1 AER, 1952.
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Part 2 – Quick look grammar revision – tips and hints
Modal auxiliaries continued……
1. Making a request
People can make a request by using various modal auxiliaries:
Would you please telephone John?
Could you please telephone John?
Will you please telephone John?
Can you please telephone John?
Would, could, will and can are grammatically interchangeable when used in a sentence making a request, but modify the degree of politeness and the underlying meaning of the request.
Although they can all be used to make a request, could is considered politer than can; and would is politer than will.
Can and could focus on whether doing what is requested is possible; will and would lack this dimension, and simply request that someone do something.
Can/Could you get this letter posted before 17h?
Is it possible for you to post the letter before 17h?
English speakers frequently give instructions in the form of a question, so as not to be perceived as being too “bossy”. However, even if the instruction is phrased in a polite way, if it comes from your boss you are expected to say “yes”!
In order to decide whether a statement using would, could, will or can is either a genuine request or an instruction, it is necessary to look at the:
relationship between the parties;
tone of voice used by the requesting party; and
subject matter of the request.
Positive answers to a request:
– Yes, of course …
– Yes, certainly …
– I’d be happy/glad/delighted to …
– Sure …
– My pleasure …
– Certainly …
– No problem …
Negative answers to a request:
– I’d like to but I can’t as I have to wash my hair …
– Sorry but unfortunately I don’t have enough time …
– Sorry, no can do … (no can do = informal response meaning that a person cannot do what they were asked)
Normally when making a request, do not use may:
May you please pass me the file? = incorrect
Use may when asking for permission to do something
May I leave the room?
2. Expressing advice or an opinion
People express advice/opinion using a number of different terms:
I should go to work;
I ought to go to work;
I had better go to work.
The negative forms are:
I should not (shouldn’t) go to work.
I ought not to (oughtn’t) go to work.
The interrogative forms are:
Should I go to work?
Ought I to go to work?
Should is used when the speaker feels personally involved in the advice (s)he is giving:
You should go to see the doctor.
If I were you, I would go to see the doctor.
Ought to expresses a more general obligation:
You ought to go to see the doctor.
Everyone would agree that given your state of health, it would be advisable to go to see the doctor.
Had better may also be used. It is used when the speaker wishes to warn against the dangers of doing something, or to show a strong recommendation:
You’d better go to see the doctor.
You are strongly advised to see the doctor, otherwise you will end up in hospital!
You’d better not eat that pizza, otherwise you’ll get food poisoning.
Had better is an idiom; it is invariable, and functions like the other modal auxiliaries without “to”.
When using had better in spoken English, you normally contract “had” to “d” for example:
I’d better, you’d better, (s)he’d better, we’d better, they’d better go to work today.
In negative forms:
I’d better not go; (s)he’d better not come, etc.
3. Expressing necessity
People express necessity using a number of different modal auxiliaries:
I have to go to work today;
I have got to go to work today;
I must go to work today.
Have to expresses necessity over which the subject has little or no control:
He has to wear glasses for driving.
He has to appear in court today.
Have got to expresses the same as above, but in an informal manner. It should not be used in written English.
Must indicates that the subject acquiesces in the necessity.
He must go to work today.
He believes that it is necessary for him to go to work today.
He has (got) to go to work today.
He is obliged to go to work today.
Have to changes to: has to in the third person singular: I have to, you have to, John has to, we have to, they have to
When talking about what was required or necessary in the past, it is not possible to use must.
Similarly, when reporting speech, must is transposed into had to.
He had to go to court yesterday.
“I must go to court today”. What did he say?
He said he had to go to court today.
In spoken English, the vowel sound in the word “to” is often unstressed. This means that its pronunciation changes from the standard strong pronunciation, written phonetically as /tu/ and pronounced as the double “o” in “boot”, to the weak form, written as /tə/ and pronounced like the “a” in “about”.
Has to /hæz tu/ becomes /hæztə/ (hasta)
Phonetically, “v” and “f” are very close. Both are labiodental (or labial) fricatives.
“V” is a voiced labiodental fricative, whereas “f” is a voiceless labial fricative.
When speaking, the voiced “v” sometimes becomes an unvoiced “f”, if the sound that follows is also unvoiced, which is the case with “t”.
“Have to” /hæv tu/ therefore sounds like /hæftə/ (hafta)
“Have got to” can also be pronounced in a weak form, which is sometimes written as “gotta”, with the final “a” pronounced as schwa – phonetically this is written /gɒtə/.
“I’ve gotta go now” or even “I gotta go now” are the written transcriptions of
what is sometimes heard in casual conversation. These forms should never
be used for written work.
Part 2 – Grammar Exercises
1. Develop the dialogue
Using the sentences below make a request and respond……
Close the door.
Would you close the door please?
Sure, no problem.
Send me an e mail by way of confirmation of your request.
Represent me in court.
Ring the client and confirm the time for the meeting.
Come into my office.
Pass me the file.
Repeat what you said.
2. Develop the dialogue continued……
Complete the dialogue using should, ought to or had better:
making a positive statement
making a negative sentence
asking a question
Call his lawyer and complain.
Send another bill to the client.
Ask the court for an adjournment.
Draft new pleadings1.
Translate the contract into English.
3. Develop the dialogue continued……
Complete the sentences using have to, has to, had to ……
I went to work this weekend because (client’s case) …… because I had to work on my client’s case.
John cannot go to court today (meeting) ……
If you want to join an international law firm (speak English) ……
I need to use the office car because (court) ……
My client could not come to the meeting because (work) ……
When I was a law student (study) ……
Answers Chapter 2 – Part 2 – Exercise 2
a) He ought to call his lawyer. He should not ring his lawyer. Should he ring his lawyer?
b) You had better send another bill to the client. You ought not to send another bill to the client. Should you send another bill to the client?
c) You ought to ask the court for an adjournment. You had better not ask the court for an adjournment. Should you ask the court for an adjournment?
d) You should draft new pleadings. You should not draft new pleadings. Should you draft new pleadings?
e) You had better translate the contract into English. You should not translate the contract into English. Should you translate the contract into English?
Answers Chapter 2 – Part 2 – Exercise 3
a) Because he has a meeting. b) You have to speak English. c) I have to go to court. e) He had to work. e) I had to study a lot.
1 The name given to the document setting out a lawyer’s arguments and that is submitted to the judge prior to the trial. The term submissions can also be used in this context.
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Part 3 – audio and Oral – LISTENING and speaking
Listen to the following conversation and make notes of all the relevant facts and then answer the questions below. If you have trouble understanding, follow the conversation while also reading the text.
Conversation between Frank Robbins and James Hunt in house lawyer/counsel for Microhard Corp.
Frank: “Hello am I speaking with James Hunt?”
James: “Hello this is James speaking, in house lawyer with Microhard Corporation; what can I do for you?”
Frank: “Hi James, my name is Frank Robbins and I am ringing you as I represent Alessandra Chisoli.”
James: “Alessandra Chisoli … could you perhaps jog my memory a little?”
Frank: “Yes of course, she is going to be Microhard’s new agent in Italy?”
James: “Ah yes Alessandra, now I know who you mean … sorry about that there is so much going on here it really is difficult to keep track of everything sometimes.”
Frank: “Not at all … I know it is a Friday evening and everything, I just thought I’d give you a ring to touch base.”
James: “OK Frank, so what can I do for you?”
Frank: “Well Alessandra has asked me to represent her in the context of her possible appointment as Microhard’s agent for Italy.”
James: “Yes, indeed so you said.”
Frank: “Yes. Well I guess I am ringing you to get some details as to the nature of the commercial agreement you envisage entering into with Alessandra.”
James: “Well, speaking off the top of my head, I would say that we intend to give Alessandra one of our standard agency contracts.”
Frank: “And what would that entail exactly?”
James: “Opphs I have got a call on another line, can I just put you on hold a second Frank as I am just awaiting confirmation on something, otherwise to be honest I would have already left the office an hour ago.”
Frank: “Sure James, take your time, I’ll be here?”
After five minutes James comes back on the line ….
James: “OK, sorry about that Hank, so what was it you wanted?”
Frank: “Its Frank, Frank Robbins … and I wanted some detail on the commercial proposal you intend making to my client Alessandra Chisoli.”
James: “Well as I told you, we will be offering her the standard agency contract for countries within the EU.”
Frank: “Yes you did and I asked you what that entailed exactly.”
James: “So you did. Look Frank its getting a bit late here and I don’t have the file in front of me …. Could I ask you to give me a ring back Monday? I’d be better placed to answer your questions then. Would that be OK?”
Frank: “If that is what you want James. Is there a good time to get you Monday?”
James: “No … I will be stuck here in the office all day and so you can ring any time you want.”
Frank: “OK… I will call you Monday afternoon and if you get a chance you might look at the file a little beforehand, that way I will have not wasted a call”
James: “Yes of course I will Frank. Enjoy the weekend.”
Frank: “Yes you too James.”
Part 3 – Audio Comprehension – Exercises
From the notes you have taken, answer the following questions
Who is Frank ringing?
On what day of the week is Frank ringing James?
Why does James put Frank on hold?
When does James ask Frank to ring back?
Why is Frank ringing James?
What contract does James intend to offer Alessandra?
2. Speaking practice
In the following series of conversation couplets develop suitable responses to the questions asked
i) Frank: “Hello could I speak to James Hunt please?”
ii) Frank: “Do you mind if I put you on hold for a minute?”
iii) Frank: “What type of contract are you thinking of offering my client?”
iv) Frank: “Would you like me to call you next week?”
v) Frank: “What does one of your standard agency contracts entail?”
vi) Frank: “Perhaps you might send me some details of the contract James?”
3. Speaking practice continued ……
Create five other conversation using in each couplet at least one word from the vocabulary found in Part I, Text 1 or Text 2
4. Speaking practice continued ……
Listen to the suggested replies and repeat
i) Frank: “Hello could I speak to James Hunt please?”
James: “Speaking, to whom am I talking?”
ii) Frank: “Do you mind if I put you on hold for a minute?”
James: “Not at all, take your time.”
iii) Frank: “What type of contract are you thinking of offering my client?”
James: “We would be willing to offer your client our standard agency agreement for EU member states.”
iv) Frank: “Would you like me to call you next week?”
James: “Yes it might be better if you were to call me next Monday afternoon.”
v) Frank: “What does one of your standard agency contracts entail?”
James: “Effectively, your client would have exclusivity but would be required to act as an agent independent from Microhard.”
vi) Frank: “Perhaps you might send me some details of the contract James?”
James: “Sure, I will e mail you a copy of the agreement if you like. Would you give me your e-mail?”
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Part 4 – Advanced reading
The clauses normally found in the non-operative part of the contract
It is a general rule of common law contract law that the parties to a contract are only bound to perform those duties and may only benefit from those rights actually outlined in the agreement. Consequently, if it is not mentioned in the contract, in principle there will probably be no obligation or right conferred on the parties. Thus, in common law contracts, everything of importance should be mentioned in the agreement taking account of every eventuality. It is only in this way that the client will be fully protected. Although every contract is specific to the agreement to which it refers, certain basic clauses are common to all contracts. It is now proposed to consider the manner in which the Anglo-Saxon contract is organized.
A contract can be divided into four parts:
the non-operative part that creates no actual substantive binding obligations or rights for the parties;
the operative part in which the actual rights and duties of the parties are set out;
the signing blocks;
The non-operative part of the contract does not normally create binding obligations; rather it sets out the context of the binding obligations created in the operative part of the contract. The non-operative part of the contract will normally be made up of the following elements.
1. Description of the parties
Every contract begins with a description of the parties. Normally, the parties will be given a shortened name as part of their description, which then will be used throughout the contract, for example:
Microhard Corp., hereafter referred to/hereinafter referred to as “Micro”.
La société Microhard Corp., ci–après dénommée “Micro”
The registered/official address of the parties is also mentioned in the description and if the contracting party is a company, then it is necessary to mention the registered address of the company as per the company’s documents. It is important to note that the administrative address of a company and its registered address can be different. It is also necessary to mention who is actually representing the company and signing on its behalf. Clearly only those company officials empowered by the company to represent it can sign on its behalf. In order to ensure that no error is made, it is advisable at the beginning of the contract negotiations to send an e-mail to the other party asking for:
the official legal name of the company;
its registered address;
the name of the party that will be signing for the company and confirmation that they are empowered to bind the company.
In this way, legal liability for any errors concerning the information communicated will be attributed to the other party.
Prior to considering the actual clauses in the contract, it is recommended that the parties agree the definitions to be given to the important terms and technical words used in the agreement. The process of defining the important/technical contract terms effectively defines the scope of the subsequent agreement. The definitions section of an agreement requires the parties to focus on the scope of the commitments they are entering into under the contract. Consequently, it is a very useful exercise both from the point of view of:
negotiating the agreement and helping the parties understand the nature of the undertakings they are agreeing to;
assisting in the subsequent performance of the contract; and
allowing the courts to better understand the contract and the obligations set out therein in the case of a subsequent dispute between the parties.
Recitals are the preamble to the contract. It is normal to begin a contract with a statement outlining who the parties are and explaining why they are entering into the agreement together. The recitals are found at the start of the contract and allow the agreement to be put in a context. They are normally prefaced by the word whereas and for this reason are sometimes referred to as the whereas clauses.
4. Statement of consideration
As we have seen, proof of the existence of sufficient consideration is necessary in common law jurisdictions in order for an agreement to be binding in law.1 At the end of the recitals, a contract should contain what is referred to as a statement of consideration, i.e. confirmation of the exchange of value between the parties underlying the agreement, for example:
NOW, THEREFORE, in consideration of the mutual covenants and obligations contained herein, the sufficiency of which is acknowledged, the parties do hereby agree as follows: …
En conséquence, en contrepartie des engagements et obligations réciproques contenues dans ce document, dont la suffisance est reconnue, les parties conviennent ce qui suit :…
1 With the exception of specialty contracts.
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Part 5 – Translation exercises
When carrying out a translation it is not necessary to translate directly word for word; rather the emphasis should be on translating the sense of the text. English and French are not directly interchangeable and so direct translations do not always convey the meaning in the text. Translate the text in italics.
Contract Drafting – identifying the parties
It is vital to describe the parties accurately as a contract will only bind those parties who are identified in the document. Thus, it is necessary to first consider who is to be bound by the agreement; this is especially true when dealing with both parent companies and their subsidiaries; as a general rule it is better to deal with a parent rather than a subsidiary as they normally have deeper pockets, i.e. more money if one is later seeking damages for non-performance of the contract. Once the parties are identified, then it is necessary to describe them correctly. In the agreement we will use for this book both Microhard Corporation Jean Dupuis SARL. are companies and thus the following issues need to be resolved prior to drafting the agreement:
identify the official name and address of the companies The official address of a company is the address it has registered with the Companies Office;
who is representing the companies The people empowered to represent the two companies will have to be identified as having the necessary powers to do so and the power to sign on their behalf.
Agency Agreement (exclusive/independent)
Microhard Corporation and Jean Dupuis Distribution
Between the undersigned:
Microhard Corporation, hereafter/hereinafter referred to as the PRINCIPAL, a company incorporated under the laws of the State of Washington, United States of America having a share capital of $1, the principal1 place of business/the registered office of which is located at Redmond, Washington State, 980526399, United States of America, represented by Brad Jones, acting in the capacity of/as Chief Executive Officer (CEO), who is vested with all necessary powers for same as evidenced by its articles of incorporation,
of the first part/on the one hand
SARL Jean Dupuis Distribution, hereinafter/hereafter (referred to as)2 the AGENT, a company incorporated under the laws of France, with a share capital of €5000, the registered office of which is located at 1 Place Victor Hugo, La Défense, Paris, France, registered with the Registre du Commerce et des Sociétés3 of Neuilly under the n°. 001, represented by Mr. Jean Dupuis, acting in the capacity of Chief Executive Officer (CEO), who is vested with all the necessary powers for same as evidenced by its articles of incorporation, hereinafter the AGENT
of the second part/on the other hand,
Hereinafter referred to as “the PARTIES”.
It is hereby agreed as follows:
Contrat de distribution exclusive
La société Microhard Corporation et la société Jean Dupuis Distribution
La société Microhard Corporation, société de droit de l’Etat de Washington, Etats-Unis au capital de 1 dollar, dont le siège social est situé à Redmond, Etat de Washington, 980526399, Etats-Unis d’Amérique, représentée par Monsieur Brad Jones agissant en qualité de Directeur général (DG) dûment habilité à cette fin
ci-après désignée le « MANDANT »,
La société Jean Dupuis Distribution, S.A.R.L de droit français au capital de 5000 euros, dont le siège social est situé à 1 Place Victor Hugo, La Défense, Paris, France, enregistrée au Registre du Commerce et des Sociétés de Neuilly sous le numéro 001, représentée par Monsieur Pierre Dupuis, agissant en qualité de Directeur général (DG) dûment habilité à cette fin
ci-après désignée le « MANDATAIRE»
Ci-après désignées les « PARTIES ».
Ont convenu ce qui suit/ Ont arrêté et convenu ce qui suit :
1 Note the difference between principAL and principLE.
2 The formula “referred to as” is optional.
3 The RCS is normally referred to as the Companies Office in Anglo-Saxon countries.