Week 1: Basics of Commercial Contracts
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Questions and Answers

Which of the following is NOT a step for the validity of a contract?

  • Capacity
  • Existence
  • Limits
  • Performance (correct)

    • A contract is only enforceable if it is in writing and signed by all parties involved.

    False

    What is the role of law in the economy?

    Facilitates transactions and enforces contracts.

    The _____ stage of commercial transactions involves negotiation and preliminary agreements.

    <p>Pre-Contractual</p> Signup and view all the answers

    Match the following stages of commercial transactions with their descriptions:

    <p>Pre-Contractual Stage = Negotiation and preliminary agreements Formation Stage = Offer, counteroffer, and acceptance Post-Contractual Stage = Execution of the contract and fulfillment of obligations Breach of Contract = Failure to meet contract expectations</p> Signup and view all the answers

    What does 'consideration' refer to in a contract?

    <p>The value exchanged between parties</p> Signup and view all the answers

    In the Formation Stage of a commercial transaction, a counteroffer indicates a rejection of the original offer.

    <p>True</p> Signup and view all the answers

    Describe one responsibility during the Pre-Contractual Stage.

    <p>Good faith.</p> Signup and view all the answers

    What is a primary goal of the informal process in dispute resolution?

    <p>To achieve a mutually satisfactory solution</p> Signup and view all the answers

    The EXW term places the majority of responsibility on the seller for transportation and clearance.

    <p>False</p> Signup and view all the answers

    What risk does the buyer assume under EXW conditions?

    <p>Damages or loss during transport</p> Signup and view all the answers

    Under FOB, the risk transfers to the buyer once the goods are loaded onto the ______.

    <p>vessel</p> Signup and view all the answers

    Which INCOTERMS term includes insurance coverage provided by the seller?

    <p>CIF</p> Signup and view all the answers

    Under CIF, the seller is responsible for delivering goods to the buyer's final destination.

    <p>False</p> Signup and view all the answers

    What responsibilities does the seller have under the FOB term?

    <p>Inland transport, export customs clearance, and loading onto the ship</p> Signup and view all the answers

    Match the INCOTERMS with their definitions:

    <p>EXW = Seller makes goods available at their premises FOB = Seller delivers goods to a named port and loads them on the vessel CIF = Seller covers costs of shipping and insurance to the buyer's port DAP = Seller delivers goods to the buyer's location and assumes all risk until then</p> Signup and view all the answers

    At what point does the risk transfer from the seller to the buyer?

    <p>When the goods are loaded onto the shipping vessel</p> Signup and view all the answers

    The seller bears all risks during the sea transport and customs clearance.

    <p>False</p> Signup and view all the answers

    What are the key buyer risks associated with the CIF term?

    <p>Limited insurance and responsibility for issues at the destination port.</p> Signup and view all the answers

    A fundamental breach of contract results in severe deprivation of the contract’s ______.

    <p>benefits</p> Signup and view all the answers

    Match the Incoterms with their risk transfer point:

    <p>EXW = At seller's premises FOB = When goods are loaded onto the ship CIF = When goods are placed on the shipping vessel</p> Signup and view all the answers

    What must the injured party do to claim damages according to Articles 45, 74-77?

    <p>Minimize losses reasonably</p> Signup and view all the answers

    Damages claimed must be unforeseeable at the time of contract formation.

    <p>False</p> Signup and view all the answers

    What are the actual losses that can be claimed as damages?

    <p>Actual losses and loss of profit.</p> Signup and view all the answers

    What is the primary purpose of the remedy 'Claim Damages'?

    <p>Compensation for losses</p> Signup and view all the answers

    A company is considered a legal person and has distinct legal rights and obligations separate from its members.

    <p>True</p> Signup and view all the answers

    What document is used to create a company?

    <p>Contract of incorporation</p> Signup and view all the answers

    The remedy that allows for the termination of a contract due to fundamental breach is called __________.

    <p>Avoidance</p> Signup and view all the answers

    Match the following company types with their descriptions:

    <p>Legal Persons = Entities distinct from their members Natural Persons = Individuals with cognitive abilities Bylaws = Rules agreed upon by company members Incorporation = Founding document for creating a company</p> Signup and view all the answers

    Which remedy requires that the delivered goods must not be unreasonable to fix?

    <p>Repair</p> Signup and view all the answers

    The board of directors is considered the ultimate authority in a company.

    <p>False</p> Signup and view all the answers

    What is one key condition for the remedy 'Price Reduction'?

    <p>Goods must still be usable</p> Signup and view all the answers

    What was the primary legal issue in the Eisner case?

    <p>Excessive compensation claims</p> Signup and view all the answers

    The court found that the Disney board acted with gross negligence in approving Ovitz's contract.

    <p>False</p> Signup and view all the answers

    What is the Business Judgment Rule (BJR)?

    <p>The BJR is a legal principle that protects directors from liability for honest mistakes in judgment when they act on an informed basis and in good faith.</p> Signup and view all the answers

    The _____ Supreme Court upheld the Disney board's decision regarding Ovitz's severance package.

    <p>Delaware</p> Signup and view all the answers

    Match the following concepts with their descriptions:

    <p>Business Judgment Rule = Protects directors from liability for honest errors Due Care = Process followed in decision-making Fiduciary Duty = Obligation to act in the best interest of the corporation Public Scrutiny = Intense examination of corporate decisions by the public and media</p> Signup and view all the answers

    What did the court emphasize about the process followed by the Disney board?

    <p>Due care was demonstrated in the decision-making process</p> Signup and view all the answers

    To pierce the BJR, plaintiffs only need to show that a decision was poor.

    <p>False</p> Signup and view all the answers

    In the Eisner case, what burden of proof did the plaintiffs fail to meet?

    <p>They failed to prove that the directors acted in bad faith, with gross negligence, or violated fiduciary duties.</p> Signup and view all the answers

    What is the primary purpose of the Business Judgment Rule (BJR)?

    <p>To encourage directors to make decisions without fear of personal liability</p> Signup and view all the answers

    The Duty of Care requires directors to act unreasonably and without prudence.

    <p>False</p> Signup and view all the answers

    What shifts the burden of proof to the directors in cases of a material conflict of interest?

    <p>Showing a material conflict of interest</p> Signup and view all the answers

    The fiduciary duty of loyalty is sometimes described as the duty of _______.

    <p>unselfishness</p> Signup and view all the answers

    What is a characteristic of the Duty of Good Faith?

    <p>Requires honesty of purpose in pursuing the corporation's best interest</p> Signup and view all the answers

    Match the fiduciary duties with their descriptions:

    <p>Duty of Care = Acting reasonably and with prudence Duty of Loyalty = Avoiding conflicts of interest Duty of Good Faith = Acting with honesty of purpose Business Judgment Rule = Protecting the decision-making process from excessive interference</p> Signup and view all the answers

    Why is the exact meaning of the Duty of Good Faith considered ambiguous?

    <p>Its meaning varies in different contexts.</p> Signup and view all the answers

    The Disney case illustrates the application of the Business Judgment Rule.

    <p>True</p> Signup and view all the answers

    Study Notes

    Week 1: Basics of Commercial Contracts and Role of Law

    • A contract is an agreement between two or more parties to do or not do something
    • Contracts set out obligations for parties to meet their interests and expectations
    • Contracts can be binding and enforceable even without being written or signed
    • Commercial contracts are focused on business activities like buying, selling, or trading goods
    • Valid contracts require existence (offer and acceptance, mutual consent), capacity (legal age and sound mind), and limits (must comply with laws, morals, and public order)
    • Laws regulate behaviour, protect rights (like privacy and freedom), resolve disputes, and promote justice
    • Laws facilitate transactions, enforce contracts, regulate markets, and protect property rights
    • Sources of social obligations and social rules include law, market forces, social norms, and technology

    Week 2: Negotiating Commercial Contracts in Global Trade

    • Pre-contractual stage involves negotiations, information exchange, and preliminary agreements (e.g., LOI, MOU)
    • Duties in the pre-contractual stage include good faith, confidentiality, and avoiding misrepresentation; the goal is to clarify terms and interests
    • Formation stage involves offer, counteroffer, acceptance, and consideration (value exchange)
    • Performance stage involves the fulfillment of contract terms or breach with remedies for non-fulfillment

    Week 3: Contract and Business Law in Europe

    • Key components of contract formation include negotiation, offer and acceptance, and performance
    • Contracts for the international sale of goods (CISG) have rules and obligations for sellers and buyers
    • If contracts are breached, buyers and sellers have remedies according to the type of breach and location

    Week 4!: Performing Commercial Contracts and Solving Disputes

    • Contracts should meet ordinary use, specific purposes, and match samples/models with proper packaging
    • EXW (Ex Works) -seller makes goods available at a location (e.g., warehouse) and buyer is responsible for pickup and the risks related to the transport.
    • FOB (Free on Board) -seller is responsible for delivery to a port and loading onto the vessel and risk transfers when loaded
    • CIF (Cost, Insurance and Freight) -seller covers shipping and insurance to the buyer's destination, and the risk transfers once the goods are placed on the vessel

    Week 9: Raising Capital and Preparing for Sale

    • Important tools in preparing a sale (or merger), involve agreements like "Drag Along" and "Tag Along" to ensure clarity and facilitate the transaction
    • Investment contracts must detail the rights of new investors, governance changes due to the injection of new capital, and exit strategies for investors

    Key Issues for Creating a Business Company

    • Key decisions when establishing a business include the company name, address, purpose, legal form (proprietorship, partnership, corporation), and duration
    • Capital contributions may be monetary or non-monetary
    • Share structures include LLPs (Limited Liability Partnerships) and Joint Stock Companies
    • Members have rights to political (e.g., voting) and economic participation within the business

    Other Key Topics

    • Lex Mercatoria: Body of rules in international commerce
    • Arbitration: Dispute resolution mechanism, important criteria include compliance with conventions and the availability of resources
    • Business Judgement Rule (BJR): Protects directors and officers from liability for honest mistakes in judgment, provided they exercised due care
    • Duty of Care and Duty of Loyalty: Essential duties of directors; care demands the exercise of prudence; loyalty demands acting in the company's best interest; breach can lead to lawsuits

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    Commercial Contracts Law Review PDF

    Description

    This quiz covers the foundational concepts of commercial contracts and the role of law in business transactions. Discover the essential elements required for a valid contract and understand how laws regulate interactions and protect rights. Test your knowledge on the obligations and enforceability of contracts in a commercial context.

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