1] What do you mean by preamble of an agreement? Give example.

Most contracts include a set of paragraphs that cover a few significant aspects of the
agreement, the linked transaction, or the parties' businesses, and that assist the reader
comprehend the context before diving into the definitions section. The prelude is another
name for this section. A contract's preamble is the first paragraph in which the parties to the
agreement are identified. Recitals are usually placed after it (also called the background
section). "Whereas" is a common label for these recital paragraphs. The preamble and
recitals, when combined, reveal who, what, when, and why the transaction is taking place. To
put it another way, they should tell the reader who the parties to the agreement are, when it
was signed, and what the parties hoped to achieve by doing so. Only goals, desires, or
declarations of fact should be included in the preamble. It is common to confine these
declarations to topic matters that could directly impact the contract's legality or
enforceability. Other details that illustrate the wider picture of the proposed transaction, such
as the contract's interdependency with other agreements (if any) or the requirement that
certain critical conditions be met or regulatory clearances be granted, can also be addressed
here. The things mentioned in a preamble should be of such importance that if any of them
are false, the contract should be voidable under the legal doctrine of ‘mistake'. Example The
general purpose of this Agreement is to establish and maintain collective bargaining relations
between the Hospital and the employees covered by this Agreement; to provide for ongoing
communication between the Union and the Hospital, as well as the prompt resolution of
grievances and the final settlement of disputes; and to establish and maintain mutually
satisfactory wages, hours of work, and other employment conditions in accordance with the
provisions of this Agreement. It is understood that staff want to collaborate effectively with
the hospital in order to provide the greatest possible treatment and health protection for
patients.

2] Which clause is used to explain the backdrop of an

agreement? Discuss with an example.
Purpose and Background of the Agreement. Parties agree to cooperate in Intellectual
property matters, whereas the Service provider is preparing to provide services of
preliminary patent or design search, patent description writing or drawing drafting
drafting, as well as consultations related to management of intellectual property objects.
The purpose of this Non-Disclosure Agreement (“Agreement”) is to agree only upon non-
disclosure of Information (as defined below) disclosed by Customer and this Agreement
does not provide any right to a Party to act on behalf ofor in the name of another Party.
The Service provider acknowledges that the information provided by the Customer
regarding technical solutions (possibly, an invention) or designs contains valuable
proprietary information of creative and competitive sensitivity (hereinafter the
“Information”). For the purposes of this Agreement, the Information shall mean all
information that has been disclosed or willbe disclosed by the Customer to the Service
provider including, without limitation, data, technology, source code, know-how,
inventions, discoveries, designs, processes, formulations, models, equipment, algorithms,
software programs, documents, specifications, information concerning research and
development work, and/or trade and business secrets or other business information in any
form that has been disclosed either directly or indirectly. Exception is applied to the
 information, which was available in public before the date of disclosure made by
Customer to the Service provider.
Examples of such clauses can be the goods or services to be provided; details about what,
when, how, and under circumstances the party providing those things will be paid; who
owns the rights to the goods or services; what happens if there is a breachof the contract
or a dispute; the term or length of the contract; what law governs (e.g., what country’s
law applies, or if in the US, what state’s law applies, and other clauses.

3] Is it a good practice to draft binding obligations in recitals?

Discuss.
Contract recitals are often included at the beginning of an agreement to lay out the
background of the deal. The Minnesota Court of Appeals recently addressed whether such
recitals are binding and what happens when the recitals contain terms or obligations not
included in the actual terms of an agreement. In the case of Construction Mortgage
Investors Co. v. Darrel A. Farr Development Corp., et al, the Appellate Court reversed the
trial court on the issue of whether or not a personal guaranty’s recital clauses created
ambiguity when read in conjunction with a loan amendment. The case concerned loan
transactions related to Darrel A. Farr Development Corporation’s (DAFDC) development of
land. DAFDC sought to modify the terms of a revolver loan from Construction Mortgage
Investors Co. (CMIC). CMIC provisionally agreed to suspend the interest payments, but only
if Darrel A. Farr (Farr) signed a personal guaranty. CMIC drafted a personal guaranty which
contained recitals referencing DAFDC’s request that CMIC suspend the requirement of
payment of monthly interest and CMIC’s agreement to do so if Farr provided CMIC with a
guaranty. The operative language of the personal guaranty did not, however, reference any
suspension or reduction of DAFDC’s monthly interest obligation. Instead, it bound Farr to
the terms of the revolver loan and permitted CMIC to alter those terms without notice to
Farr. After further negotiations, CMIC prepared an amended loan agreement which
provided, among other things, that DAFDC was obligated to pay one-half of the monthly
interest payments. The recital portion of the personal guaranty was not revised to reflect
this fact. Farr testified that he would not have signed the personal guaranty if he knew that
the loan amendment required DAFDC to pay one-half of the monthly loan interest.

Q4. What are the different kinds of Covenants? Explain with

examples.
A covenant is a provision, or promise, contained in a deed to land. Land may be subject to a
covenant which affects or limits its use. This is known as the burden of a covenant. A
covenant may give a landowner some say over what is permissible on neighbouring
property. This is called the benefit of a covenant. A covenant can be very important as it
could affect the value of land or its intended use. There are two different types of covenant,
positive and restrictive. The distinction is important as positive and restrictive covenants
affect land in different ways. A positive covenant requires some form of action to be taken
e.g. to erect a fence along a boundary. Positive covenants are generally a contract between
the original parties to the deed imposing the covenant and do not bind future land owners.
However it should be noted that future owners of the land which has the benefit of a
positive covenant can enforce the covenant against the original owner of the land that has
the burden of the covenant. A restrictive covenant limits or prevents the use of land in a
specified way to the benefit of other land. Restrictive covenants are said to run with the
land. This means that the benefit and burden of the covenant relates to land itself and not
to the land owner. If one of the original parties to the restrictive covenant sells their
property, the covenant will remain enforceable. It is important to note that a covenant can
be expressed in positive terms when it is in fact restrictive, and vice versa. If you are
considering how a covenant could affect your property, or a property you intend to
purchase you should consult a property lawyer who can advise you. There are specific
requirements for a restrictive covenant to bind subsequent owners of a property and the
law surrounding this area is complex and subject to a number of legal tests.

(e) How is ‘Language of Obligation’ different from ‘Language of

Discretion’ under the several categories of contract language.
Support your answer with an example.
A careful reader of a contract will note that there are seven different languages used. There
are different types of English voice and style combinations that are used in different parts of
the contract. One reason “legalese” is so hard to read through, is that contracts will typically
use a different voice and style for each part of the contract. Contracts are not written like
books or even essays where they will have a certain flow to the document, rather they are
written to be choppy and unambiguous.
Languages Used
1. Language of Agreement
2. Language of Performance
3. Language of Obligation
4. Language of Discretion
5. Language of Prohibition
6. Language of Policy
7. Language of Declaration
8. Language of Belief
9. Language of Intention
10. Language of Recommendation
‘Language of Obligation’ vs ‘Language of Discretion’
The Language of obligation is used to describe the duties imposed by the contract. This
Language is typified by the use of the word(s), “shall”, “must”, and “has a duty to”. The
clauses that contain this Language are the meat of the contract or the provisions that will
make a party act or refrain from acting. Whereas the Language of discretion is used to give
describes the options available for a party to choose. Not all future events are certain and
depending on the circumstances a party may choose one option over another. Examples of
this language will appear in phrases such as “has discretion to”, “is allowed to”, or “may”.
These phrases are best when used in the active voice (John may choose vs. the choice may
be made by John) because the passive voice often requires more verbiage and is less clear.
Example- Language of Discretion- The Customer may purchase Widgets only by using
Acme’s purchase-ordering system to submit a purchase order to Acme. Language of
Obligation Used to Express a Condition - To purchase Widgets, the Customer must submit
purchase orders to Acme through Acme’s purchase- ordering system.

6] What is the consequence of using the word ‘May’

while discussing the obligations of parties to an
agreement? Use illustrations to explain.
The word ‘May’ is used as the auxiliary verb in a statement permitting, but not obligated, a
party to act in a particular way. The word ‘may’ means permissive or discretionary unless
the context indicates otherwise. Using the correct language means using plain English
language and not legalese. Legalese refers to the formal and technical language of legal
documents. It is important not to use
archaic terms such as hereinafter, hereby, as they do not present a contract with anything
useful. The usage of legal pairs (e.g., good and sufficient) leads to unnecessary addition to
the contract and serves no purpose. To keep the contract simple, it is important to not use
Latin or foreign expressions (e.g., bona fide). They will help you achieve precise language
which provides firm standards for compliance and enforcement. It avoids vagueness.
Example - “Seller has not entered into any other contract or agreement to sell or encumber
the Property or any part thereof.” Here, “its” can replace “thereof.” This sentence can be
rewritten as “Seller has not entered into any other contract or agreement to sell or
encumber the Property or any of its parts. The shall and may are used outside the legal
dialect to express things other than obligation and permission. Shall is used in the first-
person in Southern British English to express the future (I shall come on Tuesday), for
example, and may is used to express possibility (It may rain).

Deepak kumar

B.A.LL.B. FIRST YEAR [SEM-2] LLOYD LAW COLLEGE.