5.1. Terms of a Contract

Topic: Classification of Terms & Boilerplate Clauses

PART A: CONCEPT & TERMINOLOGY

1. Classification of Terms

In English contract law, the remedy for a breach depends on how important the broken term is:

• Condition: A fundamental term going to the "root of the contract." Example: Seller must own the car they are selling.
  Remedy: Terminate contract + Claim damages.


• Warranty: A minor, collateral term. Example: The car has a new radio.
  Remedy: Claim damages only (cannot terminate).


• Innominate Term: Intermediate term. Remedy depends on the severity of consequences.

2. Boilerplate Clauses

Standard provisions usually found at the end of a contract:

• Force Majeure: Excuses performance for unforeseeable events (Acts of God, war).
• Severability: If one part is illegal, the rest remains valid (Blue Pencil rule).
• Governing Law: Which country's law applies.
• Entire Agreement: The written document supersedes all prior negotiations.

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PART B: INTERACTIVE EXERCISES

Exercise 1: Categorization

Decide if the breach is a CONDITION (Major) or a WARRANTY (Minor).

1. You order a red Ferrari. The seller delivers a blue Ferrari.

2. You hire a famous opera singer. She misses rehearsals but arrives for the show.

3. You hire a singer. She is too ill to sing on opening night.

Exercise 2: Identify the Boilerplate

Read the clause and select the correct legal title.

1. "If any provision... is held to be invalid... the remaining provisions shall continue..."

-- Select Title -- Force Majeure Severability Governing Law Entire Agreement

2. "This Agreement shall be governed by... the laws of the State of New York."

-- Select Title -- Force Majeure Severability Governing Law Entire Agreement

3. "Failure to perform... result of Acts of God, war, or earthquake."

-- Select Title -- Force Majeure Severability Governing Law Entire Agreement

4. "...supersedes all proposals, oral or written."

-- Select Title -- Force Majeure Severability Governing Law Entire Agreement

Exercise 3: Multiple Choice

1. A "Force Majeure" clause covers events that are:

a) Due to negligence
b) Foreseeable
c) Unforeseeable and beyond control

2. If a "Warranty" is breached, the innocent party can:

a) Terminate and refuse to pay
b) Claim damages but must continue
c) Sue for specific performance only

3. The "Contra Proferentem" rule interprets ambiguous clauses:

a) In favor of the writer
b) Against the party who wrote it
c) By dictionary definition

Exercise 4: Gap Fill (Drafting)

Complete the "Severability" clause using the word bank.

[ invalid / remainder / enforceability / provision ]

"If any of this Agreement is determined to be or unenforceable, such invalidity shall not affect the of the of this Agreement..."

Exercise 5: Terminology Match

Match the Legal Term to its Plain English meaning.

1. Void Select Meaning... A. To cancel or end a contract legally B. Of no legal effect from the beginning C. Standard clauses at the end of a contract D. Breaking a promise in a contract

2. Terminate Select Meaning... A. To cancel or end a contract legally B. Of no legal effect from the beginning C. Standard clauses at the end of a contract D. Breaking a promise in a contract

3. Breach Select Meaning... A. To cancel or end a contract legally B. Of no legal effect from the beginning C. Standard clauses at the end of a contract D. Breaking a promise in a contract

4. Boilerplate Select Meaning... A. To cancel or end a contract legally B. Of no legal effect from the beginning C. Standard clauses at the end of a contract D. Breaking a promise in a contract

ANSWER KEY

• Ex 1: 1. Condition, 2. Warranty, 3. Condition.
• Ex 2: 1. Severability, 2. Governing Law, 3. Force Majeure, 4. Entire Agreement.
• Ex 3: 1-c, 2-b, 3-b.
• Ex 4: provision, invalid, enforceability, remainder.
• Ex 5: 1-B, 2-A, 3-D, 4-C.