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LPC Law Notes International Commercial Law Notes

Intro To Commercial Contracts Notes

Updated Intro To Commercial Contracts Notes

International Commercial Law Notes

International Commercial Law

Approximately 179 pages

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INTRODUCTION TO COMMERCIAL CONTRACTS
Contract types

  1. Upstream those which provide the client with the resources needed in order to carry on his business.

  2. Downstream contracts under which the client passes on and exploits the fruits of his labour, contracts for the supply of goods and services by the business.
Standard terms and conditions

  • Use of standard terms ensures that the contract suits the needs of whichever party has been able to insist on their use.

  • Buyer will want to ensure that:

  1. The goods to be delivered are on time, preferably to own premises; and

  2. The seller to be liable for any defects.

  • The seller will want to ensure that:

  1. They have flexibility for late delivery if it is to be let down by its own suppliers;

  2. The buyer preferably collects the goods from its factory; and

  3. They are not liable for every trivial problem (will usually accept some liability for defects).

Advantages of standard terms Disadvantages of standard terms

  • Contract on favourable terms to client;

  • Standardised procedures;

  • Commercial certainty;

  • Cheaper;

  • Starting point for negotiation

  • Lack of flexibility;

  • Effective training and procedures essential;

  • Incorporation difficulties/ ‘battle of the forms’.

  • Need for regular review;

  • Legal constraints (e.g UCTA 1977).
Drafting and content of commercial contracts
Key factors in drafting commercial agreement Basic checklist for commercial agreement

  1. Analysis of client’s instructions;

  2. Establishing client’s objectives;

  3. Not losing sight of C’s commercial aims;

  4. Adapting precedents to fit C’s instructions (and not other way around).

  1. Commencement and date;

  2. Parties to contract;

  3. Recitals (if any);

  4. Definitions and interpretation;

  5. Conditions precedent (if any);

  6. Agreements;

  7. Representations/ warranties; Operative part

  8. Indemnities;

  9. Limitations and exclusions;

  10. ‘boiler plate’ clauses;

  11. Execution clause and signature;

  12. Schedules.
Recitals

  • Recitals can be useful to help put the contract in context or explain the reason the reason for a contract being entered into.

  • Alternatively, may set out the factual background to an exclusion clause by explaining the decision of the parties to impose the risk of loss on one party rather than the other.
Definitions clause

Basic rules:

  1. Should give no more than give a clear meaning to defined terms;

  2. All defined terms should start with a capital letter;

  3. Defined terms should be listed alphabetically for ease of reference;

  4. Should be used only where they are recurrent in the body of the agreement (or where danger of ambiguity);

  5. All defined terms should be defined in the definitions section;

  6. Definitions must meet the requirements of the agreement;

  7. Care should be taken in defining things which might be subject to change during the contract.
Interpretation clause

  • Covers the basics of interpretation, for example, by providing that the headings do not form part of the agreement.

  • Principles of European Contract Law:

  1. A contract is to be interpreted according to the common intention of the parties even if this differs from literal meaning of the words;

  2. If one party intended contract to have a particular meaning, and at time of the contract’s conclusion the other party could not have been unaware of the first P’s intention, the contract is to be interpreted in the way intended by the first party.

  3. If not intention can be established according to the above, the contract is to be interpreted according to the meaning that could reasonably be understood by peers of the parties in the same circumstances.
‘The operative part’
Conditions precedent

  • Conditions that must be satisfied before the agreement comes into effect.

  • Such as contract being conditional upon buyer obtaining letter of credit.
Agreements

  • Define the rights and obligations of the parties.

  • For example, in a sale of goods contract, the seller will be promising to seller and deliver goods of a certain description and quality.
Representations and warranties

  • Statements of factual and legal matters which one the parties requires to be made to it in a legally binding way.

  • Warranties are promises that a given statement of fact is true.
Indemnities

  • One parties promises to make good another’s loss.

  • If A incurs loss as a result of the happening of a particular event, then B will indemnify A.
Limitation & exclusion of liability in contracts

  • Is clause liable to come within the scope and effect of UCTA 1977?
‘...

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