Drafting and analyzing contracts : a guide to the practical application of the principles of contract law / Scott J. Burnham, Frederick N. & Barbara T. Curley Professor of Commercial Law Gonzaga University Schol of Law.
2016
KF807 .B87 2016 (Map It)
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Author
Title
Drafting and analyzing contracts : a guide to the practical application of the principles of contract law / Scott J. Burnham, Frederick N. & Barbara T. Curley Professor of Commercial Law Gonzaga University Schol of Law.
Published
Durham, North Carolina : Carolina Academic Press, [2016]
Call Number
KF807 .B87 2016
Edition
Fourth edition.
ISBN
9780769848976 (softbound)
0769848974 (softbound)
9780769896694 (eBook)
0769848974 (softbound)
9780769896694 (eBook)
Description
xvii, 374, 7 pages : illustrations, forms ; 26 cm
System Control No.
(OCoLC)932109931
Note
Includes index.
Other Editions
Available in Other Form
Online version: Burnham, Scott J. Drafting and analyzing contracts Fourth edition 9780769896694 (OCoLC)932110046
Record Appears in
Gift
Purchased from the income of the Edith L. Fisch Fund
Gift
The Arthur W. Diamond Law Library
Purchased from the income of the Edith L. Fisch Fund
Table of Contents
Introduction
Goals Of The Book
1
Organization Of The Book
3
How To Use The Book
5
Part I How The Principles Of Contract Law Are Exemplified In Drafting
ch. 1
Offer And Acceptance
1.1.
Introduction
9
1.2.
Firm Offers [—] U.C.C. [§] 2-205
10
1.3.
Did Negotiating Parties Intend An Agreement?
13
1.4.
Drafting Assent For An Electronic Transaction
13
1.5.
Battle Of The Forms [—] U.C.C. [§] 2-207
15
1.6.
Ethics In Offer And Acceptance
19
1.7.
Exercises
21
ch. 2
Consideration
2.1.
Introduction
29
2.2.
Statutes Dispensing With Consideration
30
2.3.
Recital Of Consideration
31
2.4.
Adequacy Of Consideration
31
2.5.
Drafting The Recital Of Consideration
32
2.6.
Illusory Contracts
33
2.7.
Distributorship Agreements
34
2.7.1.
Criteria For Termination
35
2.7.2.
Time When Both Are Bound
35
2.7.3.
Silence As To Term
36
2.7.4.
U.C.C. Approach
36
2.8.
Output And Requirements Contracts
36
2.9.
Satisfaction Clauses
37
2.10.
Exercises
38
ch. 3
Indefiniteness
3.1.
Introduction
41
3.2.
Parties Do Not Intend To Enter Into A Contract
42
3.3.
Parties Intend To Enter Into A Contract With Incomplete Terms
44
3.4.
Parties Intend To Enter Into A Contract With Some Provisions To Be Agreed Upon At A Later Time
45
3.5.
Resources Of The Law: The U.C.C.
45
3.5.1.
One Of The Parties
46
3.5.2.
Third Party
46
3.5.3.
External Standard Or Event, Such As A Market Price Or The Terms Set By Other Parties
46
3.5.4.
Gap Fillers
47
3.6.
Other Resources To Make An Agreement Definite
47
3.6.1.
Statutes And Case Law
47
3.6.2.
Custom And Usage
47
3.6.3.
Extrinsic Evidence
48
3.6.4.
Objective Methods Of Determination
48
3.7.
Ethics In Drafting
48
3.8.
Exercises
49
ch. 4
Enforceability
4.1.
Introduction
55
4.2.
Regulation Of Form
56
4.3.
Regulation Of Substance
56
4.4.
Surrendering A Right
58
4.5.
Unconscionability
59
4.6.
Severability
60
4.7.
Consumer Protection Acts
61
4.8.
Ethics In Drafting
62
4.8.1.
Model Rules Of Professional Conduct
62
4.8.2.
Ethics Committee Decisions
63
4.9.
Application: Exculpatory Clauses
65
4.10.
Ethical Recommendations
67
4.11.
Exercises
68
ch. 5
Capacity
5.1.
Introduction
71
5.2.
Behavior
71
5.3.
Fraud
72
5.4.
Mental Capacity
73
5.5.
Minority
74
5.6.
Authority
75
5.7.
Exercises
75
ch. 6
Parol Evidence
6.1.
Introduction
77
6.2.
Is The Agreement Final?
78
6.3.
Is The Agreement Complete?
78
6.4.
Merger Clause
79
6.5.
Exception: Formation Issues
81
6.6.
Exception: Conditions
82
6.7.
U.C.C. Parol Evidence Rule
82
6.8.
Separate Agreement
83
6.9.
Interpretation
84
6.10.
Modification
84
6.11.
Ethics In Drafting: The Scrivener's Error
85
6.12.
Exercises
86
ch. 7
Interpretation
7.1.
Introduction
89
7.2.
"Rules Of Interpretation"
90
7.3.
Recitals
91
7.4.
General And Particular
92
7.5.
Vagueness
94
7.6.
Ambiguity
95
7.6.1.
Connectives
96
7.6.2.
And/or
98
7.6.3.
Modifiers
98
7.7.
Cures For Ambiguity
99
7.7.1.
Definition
100
7.7.2.
Tabulation
103
7.7.3.
Describing Characteristics Or Classes
104
7.7.4.
Listing Conditions Or Criteria
105
7.8.
Calculated Ambiguity Or Inconsistency
106
7.9.
Exercises
106
ch. 8
Mistake
8.1.
Introduction
113
8.2.
Putting The Assumptions In The Contract
113
8.2.1.
Recitals
113
8.2.2.
Representations And Warranties
114
8.3.
Assuming The Risk
114
8.3.1.
Merger Clause
114
8.3.2.
Inspection Clause
115
8.3.3.
Absolute Promise To Perform Irrespective Of The Actual Conditions Existing
115
8.4.
Releases
116
8.5.
Ethical Issues
117
8.5.1.
Disclosure Of Knowledge
117
8.5.2.
Taking Advantage Of A Mistake
118
8.6.
Exercises
119
ch. 9
Force Majeure
9.1.
Introduction
121
9.2.
Qualifying An Obligation
122
9.2.1.
Option Contract
122
9.2.2.
Obligation Qualified By "Best Efforts"
122
9.2.3.
Obligation That Depends On Output Or Requirements
122
9.2.4.
Power To Terminate
123
9.2.5.
Limitation Of Remedies
123
9.3.
Absolute Performance And Discharge Of Obligations
123
9.4.
Force Majeure
125
9.5.
Drafting For Specific Situations
126
9.6.
Exercises
129
ch. 10
Promise And Condition
10.1.
Introduction
131
10.2.
Promise
132
10.3.
Condition
132
10.4.
Conditions Precedent And Conditions Subsequent
133
10.5.
Using Promise And Condition As Remedies
135
10.5.1.
Who Is Supposed To Go First?
136
10.5.2.
If One Party Doesn't Perform, Must The Other Party Perform Anyway?
139
A.
Statute
139
B.
Constructive Conditions Of Exchange
140
C.
Agreement By The Parties
141
10.5.3.
How Much Or What Kind Of Nonperformance By One Party Excuses Performance By The Other Party?
142
10.6.
Ambiguously Worded Provisions
143
10.7.
Drafting Clear Conditions
144
10.7.1.
Be Clear
145
10.7.2.
Be Selective
145
10.7.3.
Use Recitals
145
10.7.4.
Build The Remedy Into The Contract
146
10.7.5.
Insert A Non-Waiver Clause
146
10.8.
Exercises
146
ch. 11
Modification And Discharge
11.1.
Introduction
151
11.2.
Common Law Modification Of Executory Agreements
152
11.3.
Modern Rule
153
11.4.
Unilateral Modification
154
11.5.
Settlement Of Claims
155
11.5.1.
Unliquidated Or Disputed Obligations
156
11.5.2.
Accord And Satisfaction Contrasted With Substituted Contract
157
11.5.3.
Liquidated And Undisputed Obligations
158
11.5.4.
Drafting A Conditional Check
158
11.6.
Provisions Barring Modification And Waiver
160
11.7.
Exercises
161
ch. 12
Warranties
12.1.
Introduction
163
12.2.
Express Warranty [—] [§] 2-313
163
12.3.
Warranty Of Title [—] [§] 2-312(1)
165
12.4.
Warranty Against Infringement [—] [§] 2-312(3)
165
12.5.
Implied Warranty Of Merchantability [—] [§] 2-314
166
12.6.
Implied Warranty Of Fitness For A Particular Purpose [—] [§] 2-315
167
12.7.
Disclaimer Of Warranties
167
12.7.1.
Disclaimer Of Express Warranties [—] [§] 2-316(1)
168
12.7.2.
Disclaimer Of Warranty Of Title
169
12.7.3.
Disclaimer Of Warranty Against Infringement [—] [§] 2-312(3)
170
12.7.4.
Disclaimer Of Implied Warranties
170
A.
Use Of A Specific Disclaimer [—] [§] 2-316(2)
171
B.
Use Of A General Disclaimer [—] [§] 2-316(3)(A)
172
12.7.5.
"Conspicuousness" Requirement
172
12.8.
Conflicts Among Warranties [—] [§] 2-317
173
12.9.
Limitation Of Remedies [—] [§] 2-719
174
12.10.
Magnuson-Moss Warranty Act
175
12.11.
Non-U.C.C. "Warranties"
179
12.12.
Exercises
179
ch. 13
Remedies
13.1.
Introduction
187
13.2.
Specific Performance
188
13.3.
Consequential Damages: Application Of The Hadley Rules
189
13.4.
Liquidated Damages
191
13.5.
Attorneys' Fees
192
13.6.
Punitive Damages
193
13.7.
Choice Of Law
193
13.8.
Choice Of Forum
194
13.9.
Arbitration
195
13.10.
Exercises
196
ch. 14
Third Parties
14.1.
Introduction
201
14.2.
Third Party Beneficiaries
203
14.3.
Assignment Of Rights
204
14.4.
Delegation Of Duties
206
14.5.
What Is An "Assignment Of The Contract"?
207
14.6.
Contractual Prohibitions
207
14.7.
Novation
208
14.8.
Exercises
209
Part II How The Principles Of Drafting Are Exemplified In Contracts
ch. 15
Framework Of A Contract
15.1.
Introduction
213
15.2.
Use Of Forms
214
15.3.
Zero-Base Drafting
216
15.4.
Structure Of A Contract
216
15.4.1.
Description Of The Instrument
217
15.4.2.
Caption
217
A.
Identifying The Parties
217
B.
Date
218
C.
Editing A Caption
219
15.4.3.
Recitals
220
15.4.4.
Transition (Language Of Agreement)
222
15.4.5.
Definitions
224
15.4.6.
Operative Language And Boilerplate Terms
226
15.4.7.
Closing
226
15.5.
Exercises
228
ch. 16
Operative Language And Boilerplate Terms
16.1.
Introduction
235
16.2.
Building Blocks Of A Contract
236
16.2.1.
Obligations
236
16.2.2.
Discretionary Authority
238
16.2.3.
Conditions
239
A.
Express Conditions
239
B.
Promissory Conditions
241
16.2.4.
Representations And Warranties
242
16.2.5.
Declarations
245
16.3.
Example: Providing For The Consequences Of Breach
246
16.4.
Boilerplate
249
16.4.1.
Headings
250
16.4.2.
Notice
250
16.5.
Example
252
16.6.
Exercises
254
ch. 17
Language Of Drafting
17.1.
Introduction
255
17.2.
Use The Present Tense
256
17.3.
Use The Active Voice
256
17.4.
Draft In The Singular
257
17.5.
Draft In Gender-Neutral Language
258
17.6.
Language Of Agreement
262
17.7.
Language Of Obligation, Discretion, And Condition
262
17.8.
Fleshing Out The Agreement For Completeness
263
17.9.
Declarations
263
17.10.
Remedies
264
17.11.
Cross-References
265
17.12.
Example Of The Language Of Drafting
266
17.13.
Exercises
268
ch. 18
Plain Language
18.1.
Introduction
273
18.2.
Subjective Standards Of Plain Language
273
18.3.
Objective Standards Of Plain Language
274
18.3.1.
Flesch Reading Ease Test
275
18.3.2.
Techniques For Improving Reading Ease
276
A.
Tabulation
276
B.
Definition
276
18.4.
Plain Language And Substance
277
18.5.
Process Of Plain Language Drafting
280
18.6.
Example Of Plain Language Drafting
283
18.7.
Is Plain Language Drafting Worth The Trouble?
289
18.8.
Computer Assistance
291
18.9.
Summary: The Elements Of Plain Language
291
18.10.
Exercises
293
ch. 19
Drafting With A Computer
19.1.
Introduction
299
19.2.
Word Processing
299
19.2.1.
Word Processing Guides You Through Original Thought
299
19.2.2.
Word Processing Improves Your Written Expression
300
A.
Grammar Checking
300
B.
Readability
301
C.
Aesthetics
301
19.2.3.
Word Processing Quickly Repeats Past Experience
302
A.
Typeover Method
303
B.
Place Marker Method
303
C.
Semi-Automatic Merge
303
D.
Automatic Merge
303
19.3.
Preparing A Document For Document Assembly
303
19.4.
Document Assembly
306
19.5.
Expert Systems
307
19.6.
Comparison By Computer
311
19.7.
Virtual Drafting
312
19.8.
Exercises
312
Part III How To Read And Analyze A Contract
ch. 20
How To Read And Analyze A Contract
20.1.
Introduction
317
20.2.
Outline Of The Passes
319
20.2.1.
First Pass: Orientation
320
20.2.2.
Second Pass: Explication
320
20.2.3.
Third Pass: Implication
321
20.2.4.
Fourth Pass: Remediation
321
20.2.5.
Fifth Pass: Evaluation
322
20.3.
First Pass: Orientation
323
20.3.1.
Ascertain The General Theme
323
A.
Description Of The Instrument
323
B.
Caption
324
C.
Recitals
325
D.
Primary Exchange Of Promises
325
20.3.2.
Detect The Structure Of The Contract
326
A.
Foundation Or Cathedral?
326
B.
Stepping Stone Or Final Agreement?
326
C.
What Are The Parts Of The Contract?
327
20.3.3.
See The Transaction Against A Larger Background
328
A.
What Are The Goals Of The Parties?
328
B.
What Are The Applicable Rules Of Contract Law?
329
C.
Is There Applicable Regulation?
329
20.4.
Second Pass: Explication
330
20.4.1.
Identify The Boilerplate Terms
330
A.
Merger
331
B.
Modification
331
C.
Assignment And Delegation
332
D.
Force Majeure
332
E.
Severability
332
F.
Headings
333
G.
Dispute Resolution
333
i.
Arbitration
333
ii.
Choice Of Law
334
iii.
Choice Of Forum
334
iv.
Attorneys' Fees
334
20.4.2.
Ascertain The Rights And Duties Of Each Party
334
A.
Identify Promises
335
B.
Watch For Promises That Are Beyond Customary Norms
336
C.
Determine The Duration Of The Contract
338
D.
Identify Conditions
338
i.
Event Is Within The Control Of Neither Party
339
ii.
Event Is Within The Control Of The Party Whose Performance Is Conditional On The Event
340
iii.
Event Is Within The Control Of The Other Party
340
20.4.3.
Consider Creating A Graphic
341
20.5.
Third Pass: Implication
342
20.5.1.
Read In The Default Rules
343
20.5.2.
Read In The Implied Conditions
344
A.
Is One Party's Entire Performance A Condition Of The Entire Performance Of The Other Party?
344
B.
Who Performs First?
344
C.
Did The Party Who Performed First Protect Itself?
345
20.5.3.
Read In Trade Usage, Course Of Dealing, And Course Of Performance
345
20.6.
Fourth Pass: Remediation
346
20.6.1.
Is A Party's Nonperformance Breach?
346
A.
Changed Circumstances
346
B.
Modification Or Waiver
346
C.
Nonoccurrence Of A Condition
347
D.
Trade Usage
347
20.6.2.
If Nonperformance Is Not Excused, What Happens?
347
A.
Nonbreaching Party May Recover Damages
347
i.
Ask What The Nonbreaching Party Would Have Had If The Contract Had Been Performed
348
ii.
Look For Express Terms Relating To Damages
348
B.
Nonbreaching Party's Counterperformance May Not Be Due
348
i.
Entire Performance Was Not Given
349
ii.
Part Of The Performance Was Given
349
iii.
Performance Was Not Timely Given
349
C.
Create A Visual Representation
350
20.6.3.
Look For Terms That Address Remedies
350
A.
Specific Performance
351
B.
Liquidated Damages
351
C.
Limitation Of Remedies
351
D.
Dispute Resolution
352
E.
Specifying A Remedy
352
20.7.
Fifth Pass: Evaluation
352
20.7.1.
Assemble Your Concerns
353
A.
Should You Expressly State Omitted Terms?
353
B.
Do You Understand And Agree With All The Stated Terms?
353
C.
Do You Understand And Agree With The Consequences Of Breach?
353
D.
Do You Wish To Alter Any Boilerplate Terms?
353
E.
Are There Terms You Wish To Negotiate?
354
20.7.2.
Check The Document For Completeness
354
20.7.3.
Detect Weaknesses With Language
354
A.
Plain English
354
B.
Ambiguity
355
C.
Definitions
356
20.7.4.
Explore Opportunities To Gain Greater Expertise
357
A.
Find An Up-To-Date Form
357
B.
Find A Book Or Expert On The Subject
357
20.8.
Conclusion
358
20.9.
Sample Contract
358
20.9.1.
First Pass: Orientation
359
20.9.2.
Second Pass: Explication
361
20.9.3.
Third Pass: Implication
362
20.9.4.
Fourth Pass: Remediation
362
20.9.5.
Fifth Pass: Evaluation
363
20.10.
Exercises
363
20.10.1.
Exercise 1
363
20.10.2.
Exercise 2
365
Index
I-1