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Unformatted text preview: C HAPTER 7 T HE T ERMS OF A C ONTRACT Objectives After studying this chapter, you should have an understanding of: • the difference between implied and express terms • how judges determine and interpret the content of a contract • how a party can include terms to protect itself from liability • some common commercial contracts Learning Outcomes • Understand the difference between express and implied terms of a contract (page 141/142) • Understand how courts interpret written contracts, especially where the parties’ intentions are not clearly expressed or the contract contains ambiguous language (page 141) • Recognize how parties enumerate conditions in contracts that allow them to escape from their obligations if those conditions occur (page 150) • Understand how a stronger party may reduce or eliminate any obligation to pay a damage claim by including exemption clauses in a contract (page 150) • Recognize that consumers are bound by standard form contracts even where they had no power to negotiate better terms (page 154) Chapter Summary The court presumes that the parties to a contract are free to negotiate any terms that are mutually acceptable to both parties. However, after a written contract has been made, disputes can arise on what the terms of the contract actually require of each party. The court attempts to resolve any conflict by interpreting the words of the contract in their ordinary meaning. The courts will not look beyond the words of the contact by examining oral discussions because the parol evidence rule recognizes the sanctity of the written agreement as the true and complete agreement of the parties. Sometimes circumstances change after a contract has been made. If the parties can anticipate any potential changes that may affect their willingness to be bound by the contract, they can include such circumstances in the contract so that they will not be bound to perform should such circumstances arise. Sometimes one party does not perform the contract as promised. That party is normally required to pay damages for the breach to the injured party. The party in breach may have anticipated this possibility and reduced or eliminated the risk of a payment of a damage claim by including a limitation of liability clause, an exemption clause or a liquidated damage clause. Standard form contracts are far more likely to contain such clauses that protect the party that drafted the contract at the expense of the weaker party that entered into the contract on a “take it or leave it” basis. © 2008 BY N ELSON , A DIVISION OF T HOMSON N ELSON L TD . PART 2: CONTRACTS Study Outline Use this outline to prepare a complete set of notes for this chapter....
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This note was uploaded on 06/04/2009 for the course BUSINESS LAW380 taught by Professor Davidmariofarmani during the Fall '08 term at Seneca.
- Fall '08
- Business Law