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CONTRACT CLAUSES: TECHNIQUES FOR ANALYSIS - Part 1

Updated: Oct 28, 2020

In this series of posts, we will look at some techniques for analysing English contract clauses. These should make the process of trying to understand, and explain, an English contract clause a little easier. They will also help you if you are doing the TOLES (Test of Legal English Skills) Advanced exam; in particular, question 59. Let’s make a start.


Look at the following clause from a commercial contract. What kind of contract do you think it might be from?

9.3 Licensee's Remedies

In the event of a breach, or alleged breach, of any of the Licensor’s warranties in clause 9.2, Licensee shall promptly notify Licensor and return the Software to Licensor at Licensee’s own expense. Licensee’s sole remedy in such an event shall be that Licensor shall correct the Software so that it operates according to the warranties set out in clause 9.2. Licensee is not entitled to any damages if the Software does not meet the said warranties.”


If you said that the clause is from a standard Software Licence Agreement, you are correct. Let’s now look at some techniques for analysing this, or indeed any, contract clause.


Step 1: DIVIDE THE CLAUSE UP INTO SMALLER SEGMENTS


Looking at the clause, it is possible to divide it up into several smaller parts, to make it more manageable. I would divide it up like this:


(i) 9.3 Licensee's Remedies


(ii) In the event of a breach, or alleged breach, of any of the Licensor’s warranties in clause 9.2, Licensee shall promptly notify Licensor and return the Software to Licensor at Licensee’s own expense.

(iii) Licensee’s sole remedy in such an event shall be that Licensor shall correct the Software so that it operates according to the warranties set out in clause 9.2.

(iv) Licensee is not entitled to any damages if the Software does not meet the said warranties.


We can see that the clause divides nicely into four smaller parts. This should make it easier to approach.


STEP 2: SUB-DIVIDE EACH SEGMENT INTO SMALLER SEGMENTS


Now consider sub-dividing each of your segments into smaller segments. This may not always be necessary. For example, we can see that (i) is already quite short and easily manageable. That is not surprising. It is the clause heading and describes briefly what the clause deals with. In a few moments, we will look at the second segment, (ii), in more detail.


STEP 3: MAKE SURE YOU UNDERSTAND WHAT THE VOCABULARY IN THE SEGMENT MEANS – AND CAN EXPLAIN IT IN PLAIN ENGLISH


Here, you must be careful. We know that words in legal documents do not just have a ‘dictionary’ meaning. They may also have a ‘legal’ meaning. It is important that you identify the words which have a legal meaning and be ready to explain them in plain English.


Let’s have a look at our segments (i) and (ii).

(i) 9.3 Licensees Remedies


We can see this is a sub-clause of clause 9 of the Software Licence Agreement. Before this, there are two sub-clauses, 9.1 and 9.2. The first things we need to ask are:


· What is a ‘licensee’? and

· What are ‘Remedies’.


A ‘licence’ is a legal document. It allows, or gives permission to, someone to do something or to use something – such as to use computer software. A licence usually only gives permission to somebody to use something for a limited time period; for example, for a year, or five years. As a legal document, it creates rights and obligations between the parties to it. The parties are the ‘licensor’ (the person or legal personality who gives the permission) and the ‘licensee’ (the person who receives the permission).


A ‘remedy’ is something which provides a solution to a problem. If you have a cold, you may take some kind of medicine – in other words, a ‘remedy’ – to cure it. In a legal context, if something goes wrong (for example, one party breaches the contract) the non-breaching, or innocent, party will usually have a legal remedy. The remedy may be, for example, monetary compensation, called ‘damages’.


From this, we can see that this sub-clause deals with some legal remedies the licensee may have if certain things happen.


Now let’s look at (ii)

In the event of a breach, or alleged breach, of any of the Licensor’s warranties in clause 9.2, Licensee shall promptly notify Licensor and return the Software to Licensor at Licensee’s own expense.


We can sub-divide this segment to make it more manageable like this:


· In the event of a breach,

· or alleged breach,

· of any of the Licensor’s warranties in clause 9.2

· Licensee shall promptly notify Licensor

· and return the Software to Licensor

· at Licensee’s own expense.


Now we can begin to look at each section logically.


‘In the event of a breach’

In a legal document, ‘in the event of’ simply means ‘if’. Basically, it introduces some kind of condition that must happen before something else can happen. This is a conditional sentence. ‘Breach’ is a word used in contract law for breaking some kind of obligation that one of the parties has to the other. Putting it together, if one of the parties does not do something that they are obliged to do under the contract.


‘or alleged breach’

Something which is ‘alleged’ is said, without proof, to have happened.


of any of the Licensor’s warranties in clause 9.2’

We know that the ‘Licensor’ is the party who is giving limited permission for the software to be used (usually because they are the legal owner of the software).


Words like ‘licence’, ‘licensor’, and ‘licensee’, are words which have both a dictionary and legal meaning. ‘Warranty’ is another word which has a very important legal meaning in a commercial contract. It also has important legal effects. However, briefly, a ‘warranty’ is a contractual promise or statement of fact, usually with some limitations. In English contract law, a warranty is a ‘minor term’ of a contract (unlike a condition, which is a ‘major term’).

We can see, therefore, that in clause 9.2, the licensor has given some promises or made statements of fact (warranties) to the licensee.

Licensee shall promptly notify Licensor’

‘Promptly’ means that something should be done without unnecessary delay, or as quickly as possible. This is obviously placing a responsibility on the licensee, now, to do something, namely to ‘notify’ (which means to inform someone or tell them something).

and return the Software to Licensor’

Here, the conjunction ‘and’ means that the licensee must do something else besides tell the Licensor of the problem; they must send the software back to the Licensor.

at Licensee’s expense’.

In other words, the licensee must themselves pay for the software to be sent back to the licensor.

Exercises:

1. You may see a commercial clause like this one in a TOLES Advanced exam, question 59. Look at the clause again, and now try and explain, in writing, the meaning of the clause to someone who speaks English – but who is not a lawyer. Try and use a modern, ‘plain English’ style to do so.


2. Try and apply the techniques to segments (iii) and (iv), below:


(iii) Licensee’s sole remedy in such an event shall be that Licensor shall correct the Software so that it operates according to the warranties set out in clause 9.2.


(iv) Licensee is not entitled to any damages if the Software does not meet the said warranties.


Good luck.

In the next part, I will give you my own suggestions.

See you next time.

© Cambridge Legal English Academy 2020

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