Contracts As Risk Management
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Transcript of Contracts As Risk Management
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