Chapter 9: Representations and Terms

What are representations in a legal context?

Statements made by one party to induce another party into a contract, which can be relied upon.

What is the difference between representations and terms in a contract?

Representations are statements of fact, while terms are the actual provisions that form the basis of the contract.

What is the legal significance of a misrepresentation?

•Potential remedies

–Rescission

§Cancellation of contract with aim of restoring parties to pre-contractual state

–Restitution

§Restoring parties to original position

–Damages in tort

§Monetarily reparation of losses

What are the three types of misrepresentation?

Innocent, negligent, and fraudulent misrepresentation.

What is the purpose of including representations in a business contract?

To provide assurance and establish trust between the parties regarding the facts that are material to the agreement.

What is a puff in contract negotiations?

Mere sales words that have no legal consequences.

What is a representation in contract negotiations?

A statement made to induce a contract that may have legal consequences if it is false.

What constitutes a contractual term?

A statement made during negotiations that becomes an enforceable obligation within a contract.

Define misrepresentation.

A false statement of an existing fact that causes the recipient to enter into a contract.

What are the elements of fraudlent misrepresentation?

·false statement or misleading silence

·made without honest belief in its truth

·made with intent to induce contract

·inducing contract

·causing a loss not always sufficiently remedied by rescission

What is the general rule regarding silence in negotiations?

Parties are not required to disclose material facts unless certain conditions apply.

What is an example of silence as misrepresentation?

Failing to disclose a change in circumstances that affects the accuracy of a previous representation.

What is rescission in the context of misrepresentation?

A remedy that cancels the contract and aims to restore parties to their pre-contractual state.

What is restitution?

Restoration of money, land, or goods to the original position of the parties.

What is innocent misrepresentation?

·false statement of fact or misleading silence

·inducing a contract

What is negligent misrepresentation?

A misrepresentation made carelessly, where the representor is liable even if unaware of its falsity.

What is fraudulent misrepresentation?

·false statement or misleading silence

·made without honest belief in its truth

·made with intent to induce contract

·inducing contract

·causing a loss not always sufficiently remedied by rescission

What is the parol evidence rule?

A rule stating that oral or extrinsic evidence cannot vary written contract terms.

What are exceptions to the parol evidence rule?

1. Rectifying a mistake 2. Proving a contract was never formed 3. Resolving ambiguities.

What is an express term in a contract?

A term that a reasonable person would believe was intended to create an enforceable obligation.

What is an implied term?

–Express terms may not fully reflect intention of parties

–Parties’ remaining intentions may be implied by law

§Common law (implied by court)

Statutory law (implied by statute

What is a standard form agreement?

A mass-produced document offering 'take-it-or-leave-it' contractual terms.

What is an exclusion clause?

A clause that excludes or limits liability in a contract.

What are the two key elements of an effective exclusion clause?

1. Party assumes all risks of the activity 2. Party waives legal rights to sue.

What must be true for an exclusion clause to be enforceable?

The term must be clear and unambiguous.

What is the contra proferentum rule?

Ambiguities in a contract are interpreted against the party that drafted the clause.

What is the business efficacy test?

A test to determine if a term is necessary for a contract to make commercial sense.

What is the significance of a fiduciary duty in contract negotiations?

It creates a special relationship of trust that may require full disclosure of material facts.

What is the legal effect of a fraudulent misrepresentation?

It allows for rescission, restitution, and damages in tort.

What is the difference between tort damages for negligent and innocent misrepresentation?

Negligent misrepresentation allows for tort damages, while innocent misrepresentation does not.

What is the role of statutory law in implied terms?

Statutory law may automatically include terms that cannot be removed from contracts.

What is the purpose of boilerplate clauses?

To standardize terms in contracts and reduce negotiation costs.

What is required for reasonable notice to an affected party in a contract for exlusion clauses?

All capitalized, red ink, bolded, italicized, underlined, shaded, highlighted, or boxed.

What is the best evidence of acceptance of a clause in a contract?

A signature.

What is often required next to especially onerous provisions in a contract?

Initials of the affected party.

What is the general enforceability of a contract if it is unconscionable or unfair?

Usually not enforced.

What is the enforcement condition for standard form ticket contracts?

Reasonable notice must occur before the contract is created.

What is the significance of a signature on a standard form contract?

It is usually proof of assent to the terms.

What is a possible exception to being bound by a signed contract?

If there was no reasonable chance to read the document.

What should be used for onerous and unusual terms in contracts?

Clear, unambiguous language.

What is 'legalese'?

Formal and technical language of traditional legal documents, difficult for non-lawyers to understand.

What are the business benefits of using plain language in legal documents?

Reduced training needs, improved communication, better customer relations, and cost savings.

What does a force majeure clause do?

Protects parties from non-performance due to unpreventable events outside their control.

What is the purpose of confidentiality clauses in contracts?

Restricts disclosure and sometimes use of confidential information.

What do arbitration clauses in contracts agree to?

Resolve disputes through arbitration instead of litigation.

What do jurisdiction clauses predetermine?

The locale of the court and whose laws will apply in the event of a legal dispute.

What does an entire agreement clause state?

–States that entire agreement contained within four corners of contract

–Controls risk that contract may be partially written and partially oral

–Means to avoid problems arising from pre-contractual inducements or representations

What is a boilerplate clause?

A standard provision that can be reused in various contractual settings.

What is the objective of boilerplate provisions?

To minimize problems with contract administration and interpretation.

What should customers indicate to be bound by a contract?

Agreement to be bound, such as initials.

What is a common misconception about clicking 'I agree' on digital agreements?

Many do not understand the terms and conditions they are agreeing to.