English for Business Purposes III

English language teacher: Miljana Stojkovic - Trajkovic

 CONTENTS
What is a contract
Reasons for having a contract
Elements of a contract
Guide to writing a contract
Negotiating a contract
Common Business Contracts
Drafting a contract
Reviewing a contract
Mistakes to avoid
Tips for writing an agreement
Performing a contract
Breach of contract and remedies
What is a Contract?
A contract is an agreement between two
or more parties that creates an obligation
on all parties to perform (or not perform)
a particular action or set of related
actions.

Contract law determines what makes a

particular contract enforceable, and
provides remedies when a contract is
breached.

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 Elements of a Contract
A legally enforceable contract requires the following:
Element Description Example

One party must promise to do

or refrain from doing some
specified thing in the future, I will build a house for you, if you
An Offer conditioned on an act, pay me $1,000
forbearance, or return promise
given in exchange

The agreement by one who

receives an offer, by express I accept your offer to build my
Acceptance act or implied conduct, to the house or Here is $1,000
terms of the offer

Something (such as an act, a

forbearance or a return
Consideration promise) that was bargained
The built house and the $1,000
for and received by each party
to a contract

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 Understand what it is you want to accomplish with the contract
and what the other party wants to accomplish

dentify your position and the other

Negotiating partys position (strengths vs. weaknesses);

a Contract Be prepared and provide room for negotiation

Bring solutions to the table try to work towards resolution

of disagreements rather than just butting heads!

Until a final definitive agreement is reached, all draft agreements

term sheets or letters of intent should clearly state the following:

This document is not intended to create or constitute any legally binding obligation between the parties hereto,
and no party shall have any liability or obligation to another with respect to this document until a fully integrated
definitive agreement is prepared, authorized, executed, and delivered by all parties.
 Common Business Contracts
Sales/Service Contracts: spells out terms
of sale of goods or services, payment
terms, warranties, rights and obligations
of parties;
Confidentiality/Non-Compete Contracts:
protects confidential information of a
business including client lists, inventions,
trade secrets, and other important
information. Non-compete provisions
must be reasonable as to time, place and
scope; and
Partnership Agreements: spells out the
obligations between partners and their
responsibilities with regard to the
ownership and management of a
10 business.
 Other Types of Business Contracts
Below is a list of other types of contracts that are commonly used in
commercial businesses:
Arbitration Agreement Equipment Lease Promissory Note
Asset Purchase Agreement Franchise Agreement Repurchase Agreements
Assignment Agreement Guaranty Agreement Sales Contract
Bonus Agreement Indemnification Agreement Services Agreement
Collaboration Agreement Joint Venture Agreement Shareholder Agreement
Consulting Agreement Lease Stock Option Agreement
Credit Agreement License Agreement Stock Purchase Agreement
Deferred Compensation Loan Agreement Supply Agreement
Plan Manufacturing Contract Trademark License Agreement
Development Agreement Merger Agreement Underwriting Agreement
Distribution Agreement Non-Disclosure Agreement Voting Agreements
Employee Stock Plan Operating Agreement Waiver Agreement
Employment Agreement

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 Drafting a Contract
Once the basic outline of terms is
negotiated, contract drafting may begin:
When given the opportunity, it
is generally best to be the party
that drafts the contract.
Advantages of controlling the
draft:
Provides extra control over the
negotiations;
Allows you to define the issues;
Prevents hidden or surprise
issues;
Enables the deal to be
structured on
your terms; and
Helps you influence the timing
of the
drafting process.
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 Drafting a Contract: Basics
Consult with an Attorney!
Ambiguities in contract provisions are
generally construed against the
draftsman.
It is acceptable to begin drafting from
a sample contract, but do not be
controlled by or become overly reliant
on its provisions one size does not
fit all!
Take the time to draft a contract that
protects your interests and is clear
and complete. For routine or recurring
types of transactions, create a
thorough but flexible form that allows
easy selection of common options for
terms.

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 Drafting a Contract: Major Elements
Performance Standards
Parties Remedies
Effective Date Risk Allocation
Statement of Service Miscellaneous Provisions
Pricing Governing Law and Dispute
Indemnities Resolutions
Representations and Signatures
Warranties

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 Simple Contract
{Name} , known as "First Party," agrees to enter into this contract with {Name}, known as "Second Party" on
{date}.
This agreement is based on the following provisions:
1. {provision}
2. {provision}
3. {provision}
Furthermore, the First Party agrees:
{other items applicable to the First Party}
and the Second Party agrees:
{other items applicable to the Second Party} .

Invalidity or unenforceability of one or more provisions of this agreement shall not affect any other provision of this
agreement.
This agreement is subject to the laws and regulations of the state of {State}.
Signed:
___________________________ __________________________
{First Party Name} {First Party Signature}
___________________________ __________________________
{Second Party Name} {Second Party Signature}
 Reviewing a Draft Contract
A draft contract or comments on a draft contract received from the
other party should be carefully reviewed.

Review should include:

Careful reading of all contract
terms;
Obtaining clarification on terms
that
appear ambiguous, confusing or
vague;
Adding terms that are necessary to
the transaction;
Confirmation that your important
comments have been reflected in
the draft; and
Final confirmation that your
17 objectives are met by the contract
 Performing the Contract
Once a valid contract is signed by
all parties, its terms are binding on
the parties, and they must fully
perform their respective
obligations that the contract
requires.
Whatever is written in the
contract becomes the complete
agreement.
Make sure all terms are in the
final contract, and be sure not
to verbally agree to modify
the terms. Verbal agreements
to modify a written contract
have all the problems of oral
contracts and may or may not
be enforceable.

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 Breach of Contract
A breach of contract occurs where a party to
a contract fails to perform, precisely and
exactly, that partys obligations under the
contract. This can happen in two ways:
Party states: I will not perform the
contract; or
Actually not performing.
The non-breaching party may then take legal
action against the breaching party for
damages and other remedies.

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 Remedies for Breach
Upon proving that a party has
breached a contract, a court may
impose a variety of remedies to
remedy the breach.
Types of possible remedies:
Monetary damage awards to
compensate the non-breaching
party;
Equitable remedies that will
enable the contract to continue or
prevent further breach;
Reformation of the contract to
reflect the actual intent of the
parties; or
An order to compel the breaching
party to perform its actions under
the contract.
Remedies are not exclusive, and
generally multiple types of
remedies may be awarded to the
non-breaching party.
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 Remedies for Breach: Monetary
Damages
The most common remedy for a breach
of contract is a monetary award, which
can come in many forms:
Compensatory this award will
compensate the non-breaching party for
actual losses incurred from the breach;
Consequential this award will cover
damages that were suffered as a result of
the breach, but not directly caused by it;
Expectation this award will provide value
equal to what should have been received
had the breach not occurred; or
Nominal this award is a small amount that
recognizes a breach occurred but that it did
not result in actual loss.
Damage awards for breach of contract
may not be punitive (more than actual
damages) unless the breaching party
acted with recklessness, malice or
deceit.

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 Remedies for Breach: Equitable
Remedies
Courts may also award equitable remedies, which are designed to
prevent or address a wrong when monetary damages are not
appropriate or sufficient:
Injunction a court can order a party to either continue performing or
stop performing an action. A party seeking an injunction must show that
there is no other sufficient remedy and that irreparable injury will result
without the injunction; or
Specific Performance a court may order a party to perform, as nearly as
practicable, its performance as promised under the breached contract.
This is not likely to be awarded unless monetary damages are inadequate,
damages are impossible to determine or the subject of the contract is
unique, such as in the sale of land. This remedy will never be granted
against an individual when it would require him or her to personally
perform services.

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 Contents
1. What is a contract?
2. Explain the elements of a business contract
3. Steps of signing a contract
4. What are some of the terms that must be included in the business contract?
5. What are some of the mistakes to avoid when negotiating a contract
6. Explain the phase negotiating a contract
7. Name some types of business contract
8. Explain basics of writing a business contract
9. What are 4 basic elements of a contract
10. Explain the breach of contract and its remedies