Sample Contract Exercise

Contracts are the bloodline of business. Thus it is absolutely crucial that you
understand what you are or your business is signing. We have looked at some
common clauses found in contracts like restraint of trade clauses, exclusion clauses
and liquidated damages clauses. In addition to these, there are many other
common clauses and the purpose of this exercise is to highlight these clauses as
well. If you do a simple search in the Internet you will realize that many of the
clauses we are talking about are indeed very common (and pretty international as
well).
Spend some time reading the contract (Appendix A, Introduction to Business Law in
Singapore) and try to understand it. This is a very very important exercise in
preparing you for the future. So take it seriously. Following that, answer the
questions that follow:
1.

Is clause 6 definitively valid? What does validity depend on?

2. Why is clause 7 important? Can the price be increased by 100%?

Cant make too big a change
3. Is clause 10 definitely valid?
4. Why have clauses such as 11b? Isnt there an implied term to that effect?
Many things may not be obvious and necessary. It is always better to provide
terms expressly, in cases such as insurance (especially).
5. How is clause 13 different from a liquidated damages clause? If there is some
breach not covered by clause 13, does it mean the innocent party cannot
sue?
Amount of damages is not stated. Purpose of an indemnity clause highlight
some things that you might be liable for since you do not know if that is a
breach or not.
Innocent party can still sue.
6. Is clause 14, definitely valid?
7. Under clause 15a, must the principal have a valid reason for terminating by
notice? Can the distributor terminate the contract by giving notice?
8. What is the importance of clause 15(b)i?
9. What is the purpose of clause 15(b)ii?
10.What is the purpose of clause 16?
How to give notice clause
11.What is the purpose of clause 17?

12.Clause 18 is very common clause. What is the purpose? To give an example:

Contract of tenancy states that rent is to be paid latest by the 14 th of each
month, failing which the landlord can terminate the lease. Tenant is always
late in paying rent (ie after the 14 th) but eventually does pay. As the rent is
good and landlord is busy he does not bother. This has been going on for
months. Then suddenly in December, rents skyrocket and there is a higher
offer to rent the place. In December, the tenant pays the rent on the 15 th, a
few days earlier than his usual. Can the landlord terminate the lease?
If not for cause 18, sleeping on his rights as a defense Something like
promissory estoppel or waiver.
However, this clause would help them prevent the waiver from arising. Hence
landlord can terminate the lease.
13.What is the purpose of clause 19?
14.In light of clause 21, if there is a dispute, can one party insist on going to the
normal
courts
instead?
Dispute resolution clause must resolve by arbitration.
15.Clause 22 is also very common. What could be an example of a term which is
illegal or unenforceable? What if the whole contract is illegal or
unenforceable?
Clause only helps if one of the clauses is illegal, the rest of the contract stays.
ROT clause may not be valid.
16.What is the purpose of clause 23?
Entire agreement clause. Parole Evidence Rule. Prevent such things from
arising, prevent bringing in implied terms.
17.What is the purpose of clause 24?
Governing law clause helps clear confusion for international conflicts.
18.We looked some very common clauses (such as 6, 7, 10, 13, 14, 16, 17, 18,
19, 21, 22, 23, 24). Will such common clauses always use the exact same
wording?
19.Ultimately your/your businesss rights depends on the what the contract
states, but how much you can put into it really depends on your bargaining
power.