Text № 14 Interpretation of contracts
Contracts are not always clear-cut. Disputes may arise as to a contract’s meaning or its terms of enforcement. Sometimes these arguments result in attempts to have the contract enforced in court. The purpose of any contract litigation is to interpret what the parties originally put in writing. To provide uniform guidelines for interpretation, the law has developed many rules for courts and lawyers to follow.
One of these rules is the parol evidence rule. In contract law, «parol» refers to oral and written statements. If two person have signed a written contract and intended it to express the full terms of their agreement, no court, in interpreting that contract, will admit as evidence any written or oral statements made prior to the signing of the written contract. Thus, a person cannot contradict or vary the terms of a written contract by introducing for the court’s consideration evidence of discussions that occurred before the written agreement was signed.
Johnson goes to Ace Auto Sales to buy a car. After finding a car he likes, he and the salesman negotiate an oral con-tract. Part of their presale discussion concerns Johnson’s desire to remove the radio from the old car that he is tra-ding in. Believing in the salesman’s good faith, Johnson signs the sales agreement, although it does not mention the radio. When it is time for the actual transfer, the auto company refuses to let him remove the radio. Consequently, the deal falls through. Sometime later, in a suit brought over the contract, Johnson attempts to convince the court that he* should have been permitted to take out the radio prior to the actual trade-in. Since no mention of this discussion was made in the contract, the court will not permit this parol evidence to be considered in interpreting the contract’s meaning.
There are exceptions to the parol evidence rule. The law allows the introduction of parol evidence if there is some indication that a purported contract is the result of fraud, duress, or illegality. In any of these circumstances, a binding contract does not exist. Second, parol evidence is admissible to show that the written agreement does not include all terms of the contract. The third exception arises when the terms of a contract are vague or ambiguous. In this case oral evidence can be introduced to help clarify the meaning of the contract. For example, it may include the term «barrel.» In the oil industry, a barrel means forty gallons. However, in the beer industry, a barrel refers to thirty gallons. In this situation oral evidence would be permitted to explain the usage of the term in the contract.
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Other rules of interpretation state that words be given their plain and usual meaning, except when customary business usage indicates a special meaning, or when a technical word is defined. Obvious mistakes of grammar or punctuation are corrected by the courts. However, ambiguous words will generally be construed more unfavorably against the party who used them. If there is a conflict between a printed word and a written word, the written word will govern. So also, when there is a conflict between a figure numeral and a written numeral, the written version will prevail.
Although these rules may seem unyielding, their purpose is to help the court interpret the contract in a manner that best expresses the intent of those who made it.
Tasks for the text:
1. Read the title of the text and say what the text is about.
2. Divide the text into some parts and name each part.
3. Make up the plan of the text.
4. Find the sentences in each part which contain the main idea.
5. Say what new facts and information you have found out from the text.
6. Give a brief summary of the text.
Text №15 Breach of contract and Remedies for breach of contract
· A contract is not usually taken to court unless one of the parties has refused to honor its terms or has performed only part of his obligation. Appropriately, this area of law is known as breach of contract law. Legally it is defined as the unjustified failure to perform any part or all of what was promised in the contract. To compensate for this failure, the injured party is entitled to relief from the courts.
A breach of contract can be entire or partial. If entire, the injured person is entitled to recover in money damages the value of the contract.
For example:
XYZ Construction Company agrees to build an addition to Jones’s home for $3,000 and to build it by June 1, 1973. The construction company, on June 1, 1973, has not started construction and indicates that it will not start construction. This is a total breach of the contract by XYZ Construction Company. Jones will be able to sue the company for the damages he suffered due to its nonperformance of the terms the contract.
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That is an example of total breach. If the contract is not carried out entirely or is performed defectively, the result is a partial breach of contract. The injured party is entitled to a partial recovery dependent on the portion of the contract that has actually been completed.
XYZ Construction Company agrees to build an addition to Jones’s home at a cost of $3,000 and to have it completed by June 1, 1973. The construction is ostensibly completed on June 1, 1973; but, on inspection, Jones discovers that a number of the bricks used in the addition are crumbling. This action results in a partial breach of contract. Because the contract was substantially fulfilled, the terms of the contracts will be enforced. However, because of the slight defect in the company’s performance of the contract, Jones is entitled to that portion of money which represents compensation for the company’s use of defective materials.
In contract law, an injured party is generally entitled to two different remedies: damages or specific performance.
Damages. Damages means money. It is the sum of money awarded to the injured party as a compensation for the losses he sustained due to a breach of contract. This sum is called the measure of damages. The court measures the damages in an attempt to put the injured party in as good a position as he would have been had the other person fulfilled his obligations under the contract.
Acme Retail Store enters into a contract by which Ace Manufacturing Company will sell it 10,000 items for $.60 per item — a total cost of $6,000. Thereafter, the seller, Ace, repudiates the entire contract, refusing to perform at all. Since Acme needs the items, it is forced to go to Trans-Limited Manufacturing Company to buy the same goods. However, the market forces Acme to pay $.80 per item, or a total cost of $8,000. When Acme sues Ace, it is entitled to damages equal to the extra amount it paid when forced to make a new contract. Thus, if the first contract had been fully executed, Acme would have spent $6,000 to purchase 10,000 items. Because of the breach, it was forced to spend $8,000. Therefore, the damages which Acme suffered would amount to $2,000 ($3,000 less $6,000= $2,000). In court, the company would be entitled to recover that amount of money.
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Specific performance. Specific performance consists of a court order commanding the party who violated the contract to carry out its terms. This extraordinary remedy is applied only when an award of money is insufficient to compensate the injured party for his loss.
Harris contracts to sell Smith a valuable ten acres of land overlooking a river valley. After the contract is signed, Harris suddenly decides that he does not want to sell the land. Smith takes Harris to court and asks the court to order Harris to sell the land to him; in other words, to specifically perform the terms of the contract. Because land is unique — Smith cannot buy that land anywhere, else — and because a sum of money is inadequate to validly compensate him for the loss of land, the court will order Harris to sell the land to Smith. This is an extremely powerful remedy, and courts have sometimes been reluctant to grant the request for specific performance. Consequently, they have restricted in use to those situations in which a sum of money cannot adequately compensate the injured person for not having the contract performed. Normally, the subject matter of the contract is unique, such as land, valuable paintings, or antiques.
Tasks for the text:
1. Read the title of the text and say what the text is about.
2. Divide the text into some parts and name each part.
3. Make up the plan of the text.
4. Find the sentences in each part which contain the main idea.
5. Say what new facts and information you have found out from the text.
6. Give a brief summary of the text.
Text № 16 Law of agency
Many contracts are created, executed, or terminated through the use of an agent. Real estate agents, rental agents, insurance brokers — even gas station attendants are classified as agents.
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Agency isessentially a relationship created by law in which one person, the principal, grants a second person, the agent, the power to act on his behalf. For example, Jones hires Smith to handle his investments. Jones has given Smith the power to buy and sell stocks and bonds in Jones’s name. Although Smith executes the order to buy 100 shares of General Motors stock, it is Jones who is legally responsible for the purchase price. As an agent, Smith is not liable for the money.
Types of agents. The authority of an agent ranges from a narrow and defined duty to a broad power of action. A general agent has the authority to handle a wide range of activities or to conduct a series of transactions. A developer, Acme Real Estate, hires Brown to promote the sale of the subdivision. Brown is a general agent. A special agent has a limited grant of authority. He is generally hired to handle a specific transaction. For example, White names Baker as his agent for the sole purpose of selling his lawn mower. Baker is a special agent. A subagent is employed by the agent to aid him in performing his job.
If Baker hires Able to help him sell the lawn mower, Able is a subagent. An apparent agent, or an agent with apparent authority, is one who, through his own actions or those of the principal, leads a third person to reasonably believe that he has the authority to act for the principal. For example , White gives Casey the title to his automobile, but gives him no authority to sell the car. Casey approaches Black and offers to sell him the automobile. Seeing the title in Casey’s hand, Black, reasonably concludes that Casey is White’s agent and therefore possesses the authority to sell the car. Casey is an agent with apparent authority.
Principals. There are also different types of principals: disclosed, undisclosed, and partially disclosed. If the agent is allowed to disclose the identity of the person for whom he is acting, he is working for a disclosed principal. The principal is undisclosed if the third party is unaware that the agent is an agent. In other words, he does not know that the agent is actually representing another individual. If the third person knows that he is dealing with an agent but does not know the identity of the principal, he is confronted with a situation involving a partially disclosed principal.
Power of attorney. A formally executed legal document granting an individual the power to act «generally» or for some specifically limited purpose is known as a power of attorney. For example, an individual might grant another individual a power of attorney to register his car in another state, to sign a lease, or to sell a house. A written power of attorney is usually prepared when the third party is either unfamiliar with the agent or cannot, by law or custom, accept the agent’s word that he has been granted this authority by the principal. A power of attorney is terminated upon the death of the principal, on the date specified in the document, or upon the revocation of the power. In the latter case, all copies of the document must be destroyed.
Responsibilities of agent and principal. An agent’s responsibilities include the following obligations:
• He must use reasonable care in performing his duties.
• He must inform the principal of all information that is relevant to the transaction.
• He must act solely for the principal and not for his own interests.
• He cannot act beyond the scope of his authority.
· He must render a full accounting of his actions. In return, the principal owes the agent a reasonable or agreed-upon compensation for his services. In addition, if the principal wrongfully terminates the agency, he is liable to the agent for breach of contract.
Termination of agency. An agency is generally terminated in the same manner as a power of attorney. It can be ended by a pre-expressed agreement or by mutual consent. It is also terminated by the death of either the principal or the agent or by the destruction of the subject matter of the agency. To illustrate the latter case, suppose Baker was authorized to sell Able’s race horse. Before the sale was completed, the horse fell ill and died. The death of the horse — the subject matter of the agency relationship — terminated the agency agreement.
If applied with full knowledge of their implications, the concept of agency can be particularly helpful when used in execution of some contracts.
The essential principles of contract law have been discussed in this chapter. Because the law varies widely from state to state and because each factual situation may mean different exceptions or extensions of the principles discussed here, competent legal advice may be necessary to fully protect your interests. The contract principles can be of important use to everyone, however. A knowledge of the rules discussed in this chapter will enable a person to recognize a contract that may present a problem, especially if one does not read It thoroughly. Many people avoid this necessity by saying that the print is too small or that it is not worth the trouble. Later they discover that preventive law is the best law — ALWAYS READ THE TERMS OF THE CONTRACT.
If you have a serious question about a provision, take it to an attorney for his examination. The fee for his services may be small in comparison to the cost of not being sure that your interests are fully protected and that the terms of the contract provide what you wish them to provide. Unfortunately, many contracts are written, signed and broken before an attorney examines the terms for his client. The individual can best safeguard his interests by utilizing the principles given in this chapter to recognize specific problems arising in his everyday contractual situations and then requesting his attorney’s advice on these problems.
Tasks for the text:
1. Read the title of the text and say what the text is about.
2. Divide the text into some parts and name each part.
3. Make up the plan of the text.
4. Find the sentences in each part which contain the main idea.
5. Say what new facts and information you have found out from the text.
6. Give a brief summary of the text.
Text № 17 Law and the Family
Legally, marriage is a civil contract entered into by two consenting and capable parties. Unlike other contracts, however, it cannot be terminated at will by the two persons involved. Unless the bond is dissolved by the state, it is binding until the death of one of the parties. Furthermore, society prohibits a person from having- more than one spouse at a time, and considers violation of this law (bigamy) to be a felony.
The validity of a marriage is determined by the laws of the state in which it takes place. Since the requirements for marriage differ among the various states, a marriage that is legal where it took place is recognized anywhere in the United States.
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