A clear and unambiguous definition section
Question 1
A clear and unambiguous definition section is not necessary where the word to be defined appears only once in the contract. Also, having clear and unambiguous definitions restricts the interpretation of a contract. Thus, where including a clear definition section will be to the disadvantage of the client, the same should not be included.
On the other hand, having an ambiguous definition section or having none at all may have the effect of conferring some rights and obligations upon parties of which they may not be aware. This would, in certain instances, put the client in a better position to negotiate terms and interpret the contract in a way that reduces liability on the part of the client.
Also, having an ambiguous definition section may also allow parties to conduct business which would otherwise be impossible where clear definitions are included. (Chapter 7, page 97-103)
Question 2
Multiple definitions for a word should not be used in a contract document to avoid instances of various and conflicting interpretations of the terms of a contract or terms. Multiple definitions may create ambiguity which may have the effect of making the contract (Chapter 7, page 102)
Question 3
This viewpoint is not correct. Lawyers are in a better position to protect entrepreneurs’ interest from their expert knowledge and experience. They are aware of the law applicable to a contract as well as the legal requirements and conditions precedent to ensure that a contract is valid and enforceable in law. This will effectively keep their clients from courts of law. (Chapter 12 page 250)
Question 4
- i) The term “you” is unclear. It does not explicitly identify the person liable to make payments under the mortgage arrangement. The person to repay the loan should be identified.
- ii) The term “Us” is ambiguous. It does not explicitly identify Scotiabank as the entity which will be receiving the loan payments.
iii) “You shall repay the loan amount and all interest payable on it in Canadian dollars”.
This phrase does not refer to the clause in the contract where the issue of loan amount and interest payable is specified. The phrase may be subject to abuse by the bank in calculating the amount owed.
- iv) “Your regular monthly loan payment and all other payments will be made at our office in Toronto, Ontario, or at any other place we may designate…”
This phrase is not specific enough to identify the exact location of the bank where the payment will be made. The phrase should have identified the building, physical address and postal address of the Toronto Office.
- v) “Before your term start date, you will pay us interest, at the rate payable on the loan amount, calculated semi-annually, not in advance, on all money we have advanced to you.”
This phrase does not refer to the clause in the contract where the issue of interest payable is defined. The mortgagor will not know how much interest he is required to pay, and the same may be subject to abuse by the bank.
- vi) “If more than 1 month will elapse from the advance date to your 1st regular payment due date, you will owe interest for the period, separately.” This phrase is not precise as to the period referred. It is not clear whether what is being referred to is the total time lapse or the time over and above the one month.
vii) “Each payment consists of a portion of the principal amount together with the interest due and payable on the monthly loan payment date.”
This phrase does not specify how much of the monthly instalments will be allocated to the principal and how much will be allocated to interest.
viii) “The principal amount is stated on page 1 and the rate of interest chargeable on it is the rate stated under Interest calculated half-yearly not in advance.”
The phrase is not clear as to which clauses in the contract it refers to. The specific clauses on the loan amount and interest should be identified.
Question 5
This provision is not well drafted. It gives the owner absolute discretion to decide whether the renovations performed by the contractor are satisfactory. It does not provide the standard or test against which the quality of renovations can be measured. The owner, in this case, cannot be seen as an expert in an agreement to which he is a party. The contract should have provided for inspection of the works by an independent construction expert who would be able to apply his expertise in determining whether the renovations are sufficient and per the agreement.
Secondly, the clause limits the remedy for non-conformity of the renovations to redoing the works. It also indicates that it will be the contractor’s obligation to repeat the renovations, but at the same time gives the contractor discretion to decide whether it will redo the work or not.
Thirdly, the clause does not indicate how the notice to the contractor will be made. There is also no provision regarding the time within which such notice will be given. It also does not indicate the period within which the contractor should redo the renovations.
There is also no provision regarding the consequences of the contractor refusing to redo the works.
(Chapter 8, page 112)
Question 6
Conditions precedent are useful to include in a contract because they determine when a contract becomes effective. They are important in some types of agreements where parties would not be willing to perform any acts that give effect to a contract before the agreement is reduced to writing. These include loan agreements, mortgages and other real estate transactions.
For instance, a financial institutional will ordinarily not be willing to finance a mortgage until it is satisfied that the legal requirements for a valid and enforceable mortgage are met. A bank would not be willing to lend money to a company until it is satisfied that it is a legal entity. The bank may also need to confirm that the security given by the company is of value and also confirm ownership thereof. These must be included in the agreement as a condition precedent to the loan being disbursed to the company.
The condition precedent, therefore, protects parties from incurring expenses or committing resources in the performance of an agreement which in the end. (Chapter 3, page 45)
Question 7
An automatic renewal clause bind parties to a contract even after the time indicated for its expiry. It is essential to be aware of automatic renewal clauses so that a party can make a choice on whether or not to continue with the contract as it is. If a party wishes to renew the contract, they must comply with the provisions on renewal concerning the notice of renewal. In default of compliance with the conditions on renewal, the party may lose out as the contract will terminate.
(Chapter 9 page 126)
Question 8
NOTICE OF RENEWAL OF LEASE
TENANT
Post Office Box Number……
Date: 1st April 2020
Dear Landlord, P.O Box……………….
RE: NOTICE OF RENEWAL OF LEASE
Kindly note that the lease commencing 1st June 2015 ends on 31st May 2020. I hereby give notice of renewal of the subsisting lease between (Name of Landlord) and myself for a further term of five years starting from 1st June 2020 to end on 31st May April 2025. The notice is effective as of the date of this Notice of Renewal. I agree to all the terms of the lease upon renewal thereof. This notice is given under the provisions of Clause 3.5 of the said Lease.
Yours Truly,
______________________
TENANT