Contracts:Contracts:

There’s Risk?There’s Risk?

Risk Management –Risk Management –Where’s the RiskWhere’s the Risk

Can you trust the personCan you trust the person

Financial miscalculationFinancial miscalculation

Contract is not performedContract is not performed

Whom do you Trust?Whom do you Trust?

Financial RuinFinancial Ruin

Covenants = PromisesCovenants = Promises

PerformancePerformance

MilestonesMilestones

RepresentationsRepresentations

WarrantyWarranty

What is a warranty?What is a warranty?

A warranty is a A warranty is a

statement of factstatement of fact

2006 White Mustang, GC - $5002006 White Mustang, GC - $500

Warranty of Fitness for a Warranty of Fitness for a ParticularParticular PurposePurpose

White Mustang for Car ShowWhite Mustang for Car Show

Warranty of Warranty of MerchantabilityMerchantability

White Mustang for Normal UseWhite Mustang for Normal Use

DefaultDefault

A party fails to perform A party fails to perform anan

obligation under the obligation under the contractcontract

RemediesRemedies

NothingNothing DamagesDamages IndemnityIndemnity DefenseDefense Hold HarmlessHold Harmless Injunctive ReliefInjunctive Relief

DamagesDamages

==

MoneyMoney

Types of DamagesTypes of Damages

ActualActual

IncidentalIncidental

ConsequentialConsequential

LiquidatedLiquidated

PunitivePunitive

Actual DamagesActual Damages

Mustang as warranted = $20,000Mustang as warranted = $20,000

Mustang as delivered = $15,000Mustang as delivered = $15,000

Damages = $5,000Damages = $5,000

IncidentalIncidental

Cost to find replacementCost to find replacement Cost of storageCost of storage Broker’s costsBroker’s costs Etc.Etc.

ConsequentialConsequential

Seller must have reason to know Seller must have reason to know consequential damages are likelyconsequential damages are likely

Buyer’s failure to deliver Mustang Buyer’s failure to deliver Mustang causes its breach of other agreement causes its breach of other agreement and damages of $100,000and damages of $100,000

LiquidatedLiquidated

Parties agree that damages may be Parties agree that damages may be hard to measure so agree ahead of hard to measure so agree ahead of time as to what they will be if there is time as to what they will be if there is a breacha breach

Must be reasonably related to Must be reasonably related to damages that can be incurreddamages that can be incurred

Can’t be a penalty (unless you are the Can’t be a penalty (unless you are the government)government)

PunitivePunitive

Not going to happenNot going to happen

Disclaimer of WarrantyDisclaimer of Warranty

Implied WarrantiesImplied Warranties

Anything other than express warrantyAnything other than express warranty

Limitation of remediesLimitation of remedies TimeTime AmountAmount Repair or ReplaceRepair or Replace

AS ISAS IS

Limitation of LiabilityLimitation of Liability

For any breachFor any breach

TimeTime

Amount of damagesAmount of damages

Types of damagesTypes of damages

IndemnityIndemnity

Indemnity = reimburseIndemnity = reimburse

DefendDefend

Hold HarmlessHold Harmless

Manage RiskManage Risk

WarrantiesWarranties

DisclaimerDisclaimer

Limitation of LiabilityLimitation of Liability

IndemnityIndemnity