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THE STRUCTURE OF A COMMERCIAL CONTRACT (5) - WORDS OF AGREEMENT

“INTERNATIONAL DISTRIBUTION AGREEMENT [The Heading]


THIS AGREEMENT IS ENTERED INTO ON THIS 18th DAY OF FEBRUARY 2021 [The Date and Commencement]


BETWEEN [the Parties]


HAPPY SKIN Inc (hereinafter referred to as “HSI”), a Company registered in the State of California, having its office at 9876 Slick Boulevard, San Jose, California

AND

THE DISTRIBUTOR CAMDIS Limited, (hereinafter referred to as “CAMDIS”) whose registered office is at 12 Mountain Road, Cambridge, England, and whose registered number is 49820912.


WHEREAS HSI is the manufacturer of a range of high-quality skin care products, including skin creams, lotions, and moisturisers designed to promote healthier skin;

WHEREAS CAMDIS is an international distributor and is engaged in the marketing of skin care products to various international markets;

WHEREAS CAMDIS, which is engaged in the marketing of skin care products in the United Kingdom (hereinafter referred to as ‘the Territory’) has proposed to distribute various skin care products produced by HSI, including skin creams, lotions, and moisturisers that are designed to promote healthier skin (hereinafter called ‘the Products’); [the Recitals]


WHEREBY it is agreed as follows….”


The short section in the extract above is called ‘the words of agreement’. In the example above, we can see that the words of agreement begin with a compound adverb, ‘whereby’. But what does ‘whereby’ mean?


Technically, ‘whereby’ means ‘in which way’ or ‘by which method’. However, once again, rather like ‘whereas’ (which we saw introducing information in the recitals), it is not helpful to try to understand its dictionary meaning in this context. It is easier to think of ‘whereby’ as a word which introduce the operative part of the contract – the part of the contract which deals with the rights, duties, and obligations of the parties who are entering into it.


In the extract, it all looks very simple – a few words basically say, ‘we are agreeing to do what comes next’ in the contract. However, the words of agreement are not always expressed so simply. For example, you might see something like this:


NOW, THEREFORE in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows…”


The first thing you will see is that the words of agreement are not introduced with ‘Whereby’. Despite this, they are still words of agreement. However, the words of agreement need a little more care and patience to understand. The wording is old fashioned and archaic. Several words and phrases in this example need to be understood:


consideration: Here, this is a reference to one of the four ‘elements’ required under English law to form a valid and legally binding contract. Essentially, ‘consideration’ is what each party ‘brings’ to the contract in exchange for what the other party is bringing. In many commercial contracts, this ‘exchange’ will almost always involve money being exchanged for something, such as goods (products) or services).


the foregoing – this means ‘just mentioned’. In other words, it is referring back to something that has just been set out.

covenants – A covenant is a legally binding obligation or agreement. Essentially, covenants are what the parties are promising to do, or not do, under the terms of the contract.


herein/hereby – These are compound adverbs. In this context, ‘here’ essentially means ‘this document’ and ‘in’ means, ‘in’. In other words, ‘in this document’. ‘Hereby’ means ‘as a result of’ or ‘because of’ this document.


Essentially, all that is required under a modern contract, are words of agreement such as:


“NOW, THEREFORE, the parties agree as follows.”


Let’s now add another section to our example contract.



INTERNATIONAL DISTRIBUTION AGREEMENT


THIS AGREEMENT IS ENTERED INTO ON THIS 18th DAY OF FEBRUARY 2021


BETWEEN


HAPPY SKIN Inc (hereinafter referred to as “HSI”), a Company registered in the State of California, having its office at 9876 Slick Boulevard, San Jose, California


AND


THE DISTRIBUTOR CAMDIS Limited, (hereinafter referred to as “CAMDIS”) whose registered office is at 12 Mountain Road, Cambridge, England, and whose registered number is 49820912.


WHEREAS HSI is the manufacturer of a range of high-quality skin care products, including skin creams, lotions, and moisturisers designed to promote healthier skin;

WHEREAS CAMDIS is an international distributor and is engaged in the marketing of skin care products to various international markets;

WHEREAS CAMDIS, which is engaged in the marketing of skin care products in the United Kingdom (hereinafter referred to as ‘the Territory’) has proposed to distribute various skin care products produced by HSI, including skin creams, lotions, and moisturisers that are designed to promote healthier skin (hereinafter called ‘the Products’);


WHEREBY it is agreed as follows.


1. DEFINITIONS

In this agreement,

Agreement” shall mean this Agreement

Product” shall mean and refer to the items listed in Schedule 1, annexed hereto.

Territory” shall mean and refer to those parts of the United Kingdom outlined in red on the plan in Schedule 2, annexed hereto.”



© Cambridge Legal English Academy 2021



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