LEGAL ENGLISH manual (2019-2020)

2. Below is the e-mail of reply written by the English lawyer. Complete the e-mail by filling
in the blanks with a suitable word.

LE 2.7

Dear Ms. Connelly,

In 1_______________to your e-mail 2_______________ about companies in the UK, I am pleased to

3_______________ you with the following information.

A private limited company (Ltd.) is 4_______________ to a public limited company (plc) in
_______________both companies are separate legal entities 5_______________shareholders benefit
from limited liability. 6_______________, there are several major 7_______________ between them.
8_______________ private limited companies, which have no capital requirement, public ones are
9_______________ to have a minimum issued capital of £50,000. They also 10_______________ in the
number of directors required. 11_______________ a public limited company must have a minimum of
two directors, only one is required for a private limited company. In addition, the shares of a public
limited company can be freely 12_______________ on the stock market if the company is
13_______________. In 14_______________, the shares of a private limited company can only be
15_______________ privately with the 16_______________ of all the shareholders.

If you have any further questions before our meeting, do not 17_______________to contact me. I look
forward to 18_______________ you next month .

Best regards,

Peter Ellis

Do Worksheet 2.5

91

Setting up a company

Discussion
The two main documents for setting up a company in the UK are the Memorandum of Association and
the Articles of Association.

Discuss the following and try to list at least three items in answer to each question.
1. What sort of information do you think is contained in the Memorandum?

2. The Memorandum of Association is mainly of interest to outsiders. What outsiders do you think
may be interested in the Memorandum of Association?

3. The Articles of Association are mainly of interest to insiders. Who do you think those insiders are?

4. What sort of information do you think is contained in the Articles?

Language Use

1. Read the following text about company formation in the UK and fill out the blanks with a LE 2.8
suitable word. There are extra words that are incorrect.

Articles first of Registrar shares
authorised former out satisfied up
complied information paying secretary upon
established issued provisions settling when
filed located registered shareholders winding

Incorporating a Company in England

In the UK a company is formed and can commence trading (1)____________ the issuance of a certificate
of incorporation by the (2)____________ of Companies. This certificate is (3)____________once the
constitutional documents have been (4)____________ with the Registrar and he or she verifies that the
company has (5)____________ with all the requirements.

The two constitutional documents are the Memorandum of Association and the (6)____________ of
Association. The (7)____________ is the company’s charter and is mainly (8)____________ interest to
outsiders who may wish to have dealings with the company. It sets (9)____________ the company’s
name, objects, where the registered office is (10)____________ and the (11)____________ capital, together
with its division into (12)____________. The (same as 6)___________ of Association contain
(13)____________ for the internal management of the company, for example the rules governing the
AGMs and the board of directors as well as the procedure for (14)____________ out dividends and
(15)____________ up the company. The Articles mainly interest the (16)____________ and directors and
company officers.

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Useful verbs to describe a document
A document contains…

 basic information about …
 provisions regulating …
 clauses …
 regulations …
(Not: capital, meetings , the management of the company, how many members are required)

A document sets out (often in the form of a list)…
 the names of the founding members
 the kinds of shares
 the duties of the CEO/ CFO/ Company Secretary

(Not: information, freedom of religion, the appointment of directors)

A document provides that (= establishes that) + subject + verb
 somebody is entitled to do something
 a meeting must be convened every year

A document provides for (= establishes rules / regulations about) + something
 the appointment of managers
 the running of meetings
 the issuance of shares

A document establishes/stipulates/specifies …
 who is authorised to …
 how many members are required for a quorum
 the procedure for winding up the company
 the number of members /shares /meetings /etc.

Language note

UNDER
Notice how this information can also be expressed by using the preposition under.
 Under the Articles of Association, notification of the annual general meeting must be

served on the members 21 days in advance.
 Under the Companies Act 2006, all companies must hold an annual general meeting in

each calendar year.

STAKEHOLDERS / STOCKHOLDERS
Do not confuse these words.

 stakeholders= the people who have economic interests in a company
 stockholders= the people who own stock in a corporation

93

2. Choose the verb from the left -hand column which should be used with the
information in the right- hand column.

LE 2.9

1. contain a) ___________ which shareholders can vote
2. set out
3. provide for b) ___________ the duties of the Company Secretary
4. provide that
5. stipulate c) ___________ how many people constitute a quorum

d) ___________ all voting will be done by written ballot

e) ___________ the management of the company

f) ___________ information about the Directors and executive officers

g) ___________ the salaries of the officers are fixed by the Board of Directors

h) ___________ when the AGM must be held

i) ___________ the payment of dividends by the company

j) ___________ 54 clauses

k) ___________ the names of the subscribers

3. Fill in the blanks with a suitable verb from the previous exercise. In some gaps more than one verb
is suitable.

The Memorandum of Association (1)__________________________ the maximum number of shares the
company is authorised to issue and (2)__________________________ an objects clause which
(3)__________________________ the activities which the company can carry out. It must also
(4)__________________________ basic information about the company such as its name and whether it is
a private or public limited company.

The Articles of Association (5)__________________________ the internal management of a company. In
addition to (6)__________________________ provisions for the appointment and removal of directors as
well as the running of meetings, they (7)__________________________ the regulations concerning shares.
They also (8)_____________________ who is authorised to appoint and remove the secretary.

Below you can see the equivalent terms in the US. UK
US Memorandum of Association

Articles of Incorporation

Bylaws Articles of Association

stockholder shareholder

94

Language Use
Complete the following grid with the nominal form of the verb given.

LE 2.10

VERB NOUN
appoint
approve
dissolve
elect
issue
manage
provide
receive
record
regulate
remove
transact
vote

Language note

Verbs to express power
Formal documents frequently use the following verbs to express who has the power to
perform certain tasks.
 Shareholders generally delegate their power to issue shares to the Board of Directors.
 Copies and extracts of the minutes may be signed by two directors, by a person to whom the

day-to-day management of the Company has been delegated or by the Company Secretary
 The power to amend the bylaws is conferred on/upon the stockholders.
 The Board of Directors may confer the powers of day-to-day management of the Company,

upon one or more persons who may but need not be directors.
 The power to amend the bylaws is vested in the stockholders.

95

Language of Legal Documents

1. Legal documents frequently use reference words formed by there + preposition to refer to
something mentioned previously. Together with a partner look at the following examples and decide
what the word in bold refers to.

 The secretary shall give 30 days’ notice of all special meetings and the date and time thereof.

 Notice of the meeting and any business to be transacted thereat shall be given by the Secretary.
 The first general meeting must be held at least 6 months after incorporation and thereafter at least one

general meeting shall be held in each calendar year.

 No Restricted Shareholder shall transfer, sell, contribute, offer, or dispose of any of its Restricted Shares or
any interests therein or any rights relating thereto for a period of five years expiring on 10 October 2021.

2. Certain verbs are used in documents to establish rights and obligations, and others are used to
speak about those rights and obligations. The table below reflects verbs commonly used in both
contexts.

Rights Obligations

Legal  Special meetings may be called by  A general meeting shall be held
Documents
the Chairman. every year.

 All shareholders are entitled to  The Secretary shall fix the date.
vote.

When  Special meetings can be called by  A general meeting has to be held
speaking the Chairman. every year.

 All shareholders are entitled to /  The Secretary has to / is required
have the right to / can vote. to fix the date.

3. Many different verbs can be used with meetings. Look at the list below and discuss the different
meanings with a partner.

 arrange a meeting

 call / convene a meeting

 hold a meeting

 attend a meeting

 adjourn a meeting

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4. The following formal expressions are used in the bylaws you are going to read. Look at them
together with a partner and find a word/ expression in the box which expresses the same in
everyday English.

 before  consider  law  prohibit + somebody
 called correctly / as  departure  limited from
 does not  notify somebody
established  end and/or postpone
 carried out establish about  shares that have been
 changed  given to  notification
 despite  interpreted  spend money issued and bought

1. If the Secretary fails to fix the date of the meeting, the persons calling the meeting may do so.=

does not establish

2. No provisions in the bylaws shall be construed to preclude any director from serving the
corporation in any other capacity. = ....................................................................................
............................................................................................................................................

3. The list shall be available to any stockholder for a period of at least ten days prior to the meeting.
= ..........................................................................................................................................
............................................................................................................................................

4. The bylaws may be amended by the stockholders at any special meeting duly convened after
notice to the shareholders of that purpose. = ......................................................................
............................................................................................................................................

5. The Chief Financial Officer shall disburse funds of the corporation as he may be ordered by the
Board. = ..............................................................................................................................
............................................................................................................................................

6. The report shall be prepared in whatever manner the Board of Directors shall deem advisable. =
............................................................................................................................................

7. If less than a majority of the outstanding shares entitled to vote is represented at a meeting, a
majority of the shares so represented may adjourn the meeting. =......................................
............................................................................................................................................

8. The stockholders may continue to transact business notwithstanding the withdrawal of
stockholders. =.....................................................................................................................
............................................................................................................................................

9. It shall be the duty of the Secretary to fix the date of the meeting and give due notice thereof. =
............................................................................................................................................
............................................................................................................................................

10. Business transacted at all special meetings shall be confined to the objects of the call.= .....
............................................................................................................................................

11. The Chairman is entitled to delegate any specific powers, except such as may be by statute
exclusively conferred on the Chairman. =.............................................................................
............................................................................................................................................

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BYLAWS Video Action Inc.

STUDENT A
These are the bylaws of a US corporation which manufactures and sells video games.
1. For homework read Articles I-III carefully and take some notes in the margin of the main points.

In the next class you will be expected to answer some questions about the articles you have
prepared.
2. Look carefully at the compound “there” words in bold and in the space provided decide what
they refer to. The first one is done for you.
ARTICLE I -- OFFICES
Section 1. The registered office of the corporation shall be at:
3558 Silverside Road
Wilmington, DE 19810 USA
The registered agent in charge thereof (of the registered office) shall be: Richard Norton.
Section 2. The corporation may also have offices at such other places as the Board of Directors may from
time to time appoint or the business of the corporation may require.

ARTICLE II -- SEAL
Section 1. The corporate seal shall have inscribed thereon (on the seal) the name of the corporation,
the year of its organization and the words "Corporate Seal, "State"".

ARTICLE III -- STOCKHOLDERS' MEETINGS
Section 1. Meetings of stockholders shall be held at the registered office of the corporation in this state
or at such place, either within or without this state, as may be selected from time to time by the Board
of Directors.

Section 2. Annual General Meetings: The annual general meeting of the stockholders shall be held on
the 3rd Wednesday of February in each year if not a legal holiday, and if a legal holiday, then on the next
secular day following at 10:00 o'clock A.M., when they shall elect a Board of Directors and transact such
other business as may properly be brought before the meeting. If the annual meeting for election of
directors is not held on the date designated therefor (_________________) the directors shall cause the
meeting to be held as soon thereafter (_________________) as convenient.

Section 3. Election of Directors: Elections of the directors of the corporation shall be by written ballot.

Section 4. Special Meetings: Special meetings of the stockholders may be called at any time by the
Chairman, or the Board of Directors, or stockholders entitled to cast at least one-fifth of the votes which
all stockholders are entitled to cast at the particular meeting. At any time, upon written request of any
person or persons who have duly called a special meeting, it shall be the duty of the Secretary to fix the
date of the meeting, to be held not more than sixty days after receipt of the request, and to give due
notice thereof (_________________). If the Secretary shall fail or refuse to fix the date of the meeting
and give notice thereof (_________________), the person or persons calling the meeting may do so.

Business transacted at all special meetings shall be confined to the objects stated in the call and matters
related thereto (_________________), unless all stockholders entitled to vote are present and consent.

98

Written notice of a special meeting of stockholders stating the time and place and object thereof
(_________________), shall be given to each stockholder entitled to vote thereat
(_________________), at least 10 days before such meeting.

Section 5. Quorum: A majority of the outstanding shares of the corporation entitled to vote, represented
in person or by proxy, shall constitute a quorum at a meeting of stockholders. If less than a majority of
the outstanding shares entitled to vote is represented at a meeting, a majority of the shares so
represented may adjourn the meeting without further notice. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. The stockholders present at a duly organized meeting
may continue to transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.

Section 6. Proxies: Each stockholder entitled to vote at a meeting of stockholders or to express consent
or dissent to corporate action in writing without a meeting may authorize another person or persons to
act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period. All proxies shall be filed with the Secretary of the meeting
before being voted upon.

Section 7. Notice of Meetings: Whenever stockholders are required or permitted to take any action at
a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of
the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is
called. Written notice of any meeting shall be given not less than ten nor more than sixty days before
the date of the meeting to each stockholder entitled to vote at such meeting.

Section 8. Consent in Lieu of Meetings: Any action required to be taken at any annual or special meeting
of stockholders or a corporation, or any action which may be taken at any annual or special meeting of
such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize or take such action at
a meeting at which all shares entitled to vote thereon (_________________), were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.

Section 9 List of Stockholders: The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address
of each stockholder and the number of shares registered in the name of each stockholder. No share of
stock upon which any installment is due and unpaid shall be voted at any meeting. The list shall be open
to the examination of any stockholder, for any purpose related to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof (_________________), and may be inspected by
any stockholder who is present.

Do Worksheet 2.7A

99

STUDENT B
These are the bylaws of a US corporation which manufactures and sells video games.
1. For homework read Articles IV-VI carefully and take some notes in the margin of the main

points. In the next class you will be expected to answer some questions about the articles you
have prepared.
2. Look carefully at the compound “there” words in bold and in the space provided decide what
they refer to. The first one is done for you.
ARTICLE IV -- DIRECTORS

Section 1. The business and affairs of this corporation shall be managed by its Board of Directors, 8 in
number. The directors need not be residents of this state or stockholders in the corporation. They shall
be elected by the stockholders at the annual meeting of stockholders of the corporation, and each
director shall be elected for the term of one year, and until his successor shall be elected and shall qualify
or until his earlier resignation or removal.

Section 2. Regular Meetings: Regular meetings of the Board shall be held without notice, at least
quarterly, at the registered office of the corporation or at such other place as may be determined by the
Board.

Section 3. Quorum: A majority of the total number of directors shall constitute a quorum for the
transaction of business.

Section 4. Conference Telephone: One or more directors may participate in a meeting of the Board, or
a committee of the Board or of the stockholders, by means of conference telephone or similar
communications equipment by means of which all persons participating in the meeting can hear each
other; participation in this manner shall constitute presence in person at such meeting.

Section 5. Compensation: Directors as such, shall not receive any stated salary for their services, but
shall by resolution of the Board receive a fixed sum and expenses of attendance for each regular or
special meeting of the Board.

Section 6. Removal: Any director or the entire Board of Directors may be removed, with or without
cause, by the holders of a majority of the shares then entitled to vote at an election of directors.

ARTICLE V -- OFFICERS

Section 1. The executive officers of the corporation shall be chosen by the directors and shall be a
Chairman, President, Secretary and Chief Financial Officer. The Board of Directors may also choose one
or more Vice Presidents and such other officers as it shall deem necessary. Any number of offices may
be held by the same person.

Section 2. Salaries: Salaries of all officers and agents of the corporation shall be fixed by the Board of
Directors.

Section 3. Term of Office: The officers of the corporation shall hold office for one year and until their
successors are chosen and have qualified. Any officer or agent elected or appointed by the Board may

100

be removed by the Board of Directors whenever in its judgment the best interest of the corporation will
be served thereby (by the removal of the officer or agent).

Section 4. Chairman: The Chairman shall preside over all meetings of the stockholders and directors; he
shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the
right of the directors to delegate any specific powers, except such as may be by statute exclusively
conferred on the Chairman, to any other officer or officers of the corporation. He shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the corporation. He shall be EX OFFICIO
a member of all committees.

Section 5. President: The President shall attend all sessions of the Board. The President shall be the chief
executive officer of the corporation; he shall have general and active management of the business of
the corporation, subject, however, to the right of the directors to delegate any specific powers, except
such as may be by statute exclusively conferred on the President, to any other officer or officers of the
corporation. He shall have the general power and duties of supervision and management usually vested
in the office of President of a corporation.

Section 6. Secretary: The Secretary shall attend all sessions of the Board and all meetings at the
stockholders and act as clerk thereof (____________), and record the minutes of all its transactions in
a book to be kept for that purpose. He shall give notice of all meetings of the stockholders and of the
Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors
or President, and under whose supervision he shall be. He shall keep in safe custody the corporate seal
of the corporation, and when authorized by the Board, affix the same to any instrument requiring it.

Section 7. Chief Financial Officer: The Chief Financial Officer shall have custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and disbursements in books
belonging to the corporation. He shall disburse the funds of the corporation as may be ordered by the
Board, taking proper vouchers for such disbursements, and shall submit to the President and directors,
at the regular meetings of the Board, or whenever they may require it, an account of all his transactions
as Chief Financial Officer and of the financial condition of the corporation.

ARTICLE VI-- DIVIDENDS

Section 1. Dividends: The Board of Directors may declare and pay out dividends upon the outstanding
shares of the corporation to such extent as they deem advisable, in the manner and upon the terms and
conditions provided by the statute and the Certificate of Incorporation.

Section 2. Reserves: Before payment of any dividend, there may be set aside out of the net profits of
the corporation such sum or sums as the directors in their absolute discretion, think proper as a reserve
fund to meet contingencies, or for repairing or maintaining any property of the corporation, or for such
other purpose as the directors shall think conducive to the interests of the corporation.

Do Worksheet 2.7B

101

Language Use. Verb + noun collocations

1. Form collocations by matching a verb from the first column with a suitable expression from the
second column. Put the letter which corresponds with each verb in the space provided.

LE 2.11

1. cast ___ a) a date / an amount (eg. a salary)

2. constitute___ b) a meeting
3. declare ___ c) a quorum
4. delegate ___ d) a vote
5. elect / remove ___ e) accounts / a record of something
6. fix ___ f) business
7. give ___ g) a document / the bylaws /
8. act ___ h) a dividend
9. hold*/ call or convene / adjourn i) directors / managers /officers
j) notice of a meeting
___ k) on behalf of somebody
10. keep ___ l) power
11. record ___ m) something to somebody (for
12. submit ___
13. transact ___ approval) e.g., accounts / financial
14. amend ___ report
n) the minutes of a meeting

*Remember that hold does not have the same meaning as call/convene.

2. Use the collocations you formed in the exercise above to complete the sentences below. LE 2.12

1. The directors can __________________________ some of the Chairman’s
_________________________ to officers of the corporation.

2. At the AGM, the President and the Board of Directors have to _____________________________ a
_____________________________ to the shareholders, explaining the company’s performance during
the previous year.

3. During meetings, the Company Secretary has the obligation of ________________________
________________________ so that there will be a written record of the _________________ that was
________________________ at the meeting.

4. If the company has had good financial results, the Board of Directors may decide to
___________________________ and pay out a _________________________ to the company’s shareholders.

102

5. The Chief Financial Officer has to __________________________ _________________________ of all money
spent and earned by the company, and ________________________ them to the shareholders at the
annual general meeting for their approval.

6. The shareholders ___________________________ the ________________________________ who will represent
them on the Board of Directors at the AGM. If the director is not doing his job in a competent
manner, he can be ______________________________ by the shareholders as well.

7. The Directors of a company earn a sum of money which is ________________________by the Board of
Directors.

8. The Company Secretary is the person in charge of __________________________ any special
_____________________________ 10 – 60 days before it is ________________________.

9. The majority of the shareholders must be present or represented to __________________________
_____________________________ at the annual general meeting. If there aren’t enough shareholders,
the meeting will be ______________________ and changed to a different date.

10. In the elections held during an AGM, the number of ______________________ that a shareholder can
______________________ depends on the number of shares held.

11. According to the bylaws, ______________________________ of all special meetings must be
______________________________ in writing at least 10 days prior to the meeting.

3. Practice using the above verbs by answering the questions below.
1. How is your class delegate chosen?
2. Is this done by a show of hands or by written ballot?
3. How many votes can each student cast?
4. Who can remove the class delegate?
5. Does the delegate fix the dates for the exams?
6. How are the deputies and senators of the Parliament chosen in Spain? The Ministers?
7. Can the Spanish constitution be amended? How?
8. What does a company usually do if it makes a profit?

Do Worksheet 2.6

Language note Register: Formal words for reference

The following are examples of formal structures used in legal discourse to refer to something. They
are frequently used where about would be used in informal English. The most formal reference
words are prepositional phrases of more than one word.

 You have requested advice concerning the formation of a limited company in Barcelona.
 In reply to your e-mail regarding the incorporation of your business in New York, our firm would be

pleased to handle all the formalities on your behalf.
 You need to make a decision as to the most suitable structure for our business.
 Could you please advise us as to the best course of action?

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Modal verbs referring to the past (Level C1 only)

Modal verbs referring to the past are formed with have + past participle. Below are some modals
which can be used in relation to obligation.

 He shouldn’t have sold his shares without the consent of the

Something done incorrectly other shareholders. = He sold his shares and he was not entitled
to do so.

 He should have filed the documents at the Registry. = He had to
file them but he did not do that.

Something done which was  Sally needn’t have signed the document; your signature was
not necessary enough. = Sally signed the document but it was not necessary.

Something which was possible  He could have sent the application form by e-mail. =He was
to do, but not done
allowed to send it by e-mail but he did not do that.

Practice

Three years after Video Action was incorporated Fred Harris was named Chairman. Fred Harris and
his entire Board were inept.

Read the following account of things that happened and then, working with a partner, complete the
sentences that follow. The Article given in brackets will help you find what exactly is established in
the bylaws .

In January 2009 the existing Chairman, Bob Clark, was so tired of his post that he called an annual general
meeting for January 15th so that new directors could be elected as soon as possible. (Article III) At this
meeting Fred Harris was elected director and later appointed Chairman by the other directors. As Fred
wanted to be surrounded by friends and family, he asked the other directors if he could choose the
executive officers by himself. He chose his brother, brother-in-law and best friend to be the President,
Secretary and Chief Financial Officer. (Article V)

He was so excited about being Chairman that he called a special meeting for the next week and had the
Secretary give notice to the stockholders two days before the meeting. (Article III- Section 7)

Given that by the next special meeting Fred had read the by-laws, the meeting was duly called and
notified. Fred had the Secretary prepare the list of stockholders entitled to vote 15 days before the
meeting. The list was sent to each shareholder by messenger service and published at the headquarters,
where the meeting was going to be held. (Article III - Section 9) At the beginning of the meeting there
was a quorum, but after 30 minutes a lot of stockholders left. Fred decided to end the meeting as he
thought he could not continue to transact business. He was very disappointed as the voting on the last
resolution did not take place. (Article III - Section 5)

One of the stockholders, Alice Stevens, was also disappointed. She was interested in voting on the
resolutions, but she was not able to attend the special meeting because she had an important doctor’s
appointment. Consequently, she was not able to vote on the resolutions adopted at that meeting.
(Article III - Section 6)

The CFO liked to spend money. At first he kept records of all the money spent, but after a few months
he got tired of doing that, and just wrote down how much money was left at the end of each month.
(Article V - Section 7)

Fred liked to call special meetings. Although he sometimes got a bit nervous at the meetings because he
ran the meeting and recorded the minutes, they made him feel very important. (Article V - Section 6)
However, he did not like having to attend Board meetings. In fact, he only called one Board meeting in
the whole year. (Article IV)

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Susan was not able to participate in that meeting, as she was in the company’s office in Detroit at the
time. She did, however, watch the meeting as there was a video hook-up. She wished she had been able
to participate. (Article IV)
Fred wanted to amend the by-laws without calling a meeting. He decided to obtain the consent of all
the necessary shareholders, so he telephoned each of them and got their consent. (Article III - Section
8)
A significant group of stockholders holding over 25% of the shares with voting rights decided to call a
special meeting because they were very unhappy with what was happening. However, the Secretary
refused to give notice of the meeting and, therefore, the stockholders were not informed. (Article III -
Section 4)
For each of the following structures write three sentences based on the information in the story
above and the by-laws of the company.
shouldn’t have

a) .................................................................................................................................................
b) .................................................................................................................................................
c) .................................................................................................................................................
should have

d) .................................................................................................................................................
e) .................................................................................................................................................
f) .................................................................................................................................................
could have

g) .................................................................................................................................................
h) .................................................................................................................................................
i) .................................................................................................................................................
needn’t have

j) .................................................................................................................................................
k) .................................................................................................................................................
l) .................................................................................................................................................

105

PROFESSIONAL WRITING. Using impersonal style
As an international lawyer you may be asked to explain procedures, requirements, characteristics of
Spanish corporate structures and many other legal aspects of Spanish law both orally and in writing.
Although the personal style (You have to ….) is frequently used when speaking, when writing, to sound
more professional, you should know how to express yourself without personalising (i.e. using YOU,
WE, etc.). Below are some ways you can do this.

You can write in IMPERSONAL style by using:

a) The company/ ( A person)….+ OBLIGATION AUXILIARIES: has to, is required to…

b) 1) It is necessary /compulsory / obligatory + for somebody to do something
2) It is necessary + (subjunctive form) that something (should) be done

c) Passive structures

Note: You cannot use a double passive. The fees are required to be paid. 
Complete the sentences below using these techniques.

Setting up and Running a Public Limited Company.

1. Have a minimum share capital of £50,000
a) The company has to/needs to/is required to ...............................................................
b) It is ...............................................................................................................................................
c) .......................................................................................................................................................

2. Draw up and file the memorandum and articles of association with the Company Registrar.
a) The incorporator ....................................................................................................................
b) It is ...............................................................................................................................................
c) .......................................................................................................................................................

3. Hold an AGM once a year.
a) The company ............................................................................................................................
b) It is ...............................................................................................................................................
c) .......................................................................................................................................................

4. Submit an annual report to the shareholders.
a) The Board of Directors ........................................................................................................
b) It is ...............................................................................................................................................
c) .......................................................................................................................................................

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Formal Verbs

Circle the verb in brackets which is most suitable in the formal legal context of the LE 2.13
sentence.

1. The main advantage of setting up a limited liability company is that the members (benefit from /
profit from / participate in) limited liability.

2. Before a certificate of incorporation can be (granted / filed / issued) by the Secretary of State, the
incorporators are (required / obliged / bound) to submit the articles of incorporation and the
company bylaws to the Secretary of State.

3. The by-laws (state / stipulate / provide for) the internal management of the company.

4. A sole proprietorship will (cease /stop / finish) to exist upon the death of the proprietor.

5. Once the incorporation process is completed, the company may commence (running / trading
/selling ).

6. A partnership agreement (provides / stipulates / contains ) how the profits and losses will be
shared.

7. Sleeping partners do not normally participate in the (directing / running / heading) of the
business.

8. A public limited company differs from a private limited company in that, once issued, the former’s
shares can be (transferred / traded / purchased) on the secondary market.

9. A minimum of 25% of the authorised share capital of a public limited company must be (issued /
paid up / paid in) upon incorporation.

10. A public limited company is required to (submit / register/ file ) its audited annual accounts with
the Registrar of Companies.

11. The bylaws (set out / contain / provide) that each common stockholder shall have one vote per
share.

12. We have been (required / instructed / ordered /requested) by our client to sell all the shares he
presently owns in the company.

13. All general meetings must be (held / arranged / convened) by means of a notice in the press at
least 21 days in advance.

14. If you cannot (assist / attend / attend to) the meeting, you may choose to name a proxy to vote
on your behalf.

15. The bylaws (contain / establish / specify) provisions for the appointment and removal of the
Company Secretary.

16. Given the excellent results, the Board of Directors have (paid / decided / declared ) a dividend of
8.5%.

17. The shareholders may vote to (dismiss / resign / remove) the directors.

18. The company’s accounts are (shown / submitted / provided) to the stockholders at the AGM.

19. The power to fix the executive officers’ salaries is (entitled / conferred / vested) in the Board of
Directors.

20. The notice should state the business to be (transacted / done / negotiated) at the meeting.

Level C. Optional video and PDF worksheet

Vid 2.5 – Limited companies and corporate governance: The role of company directors

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Unit 2 - Review exercises

1. Sentence Rewrites
Practise the structures seen in this unit by rewriting the following sentences using the word in
brackets.
1. The Articles of Association provide for the running of the company. (CONTAIN)

...............................................................................................................................................
...............................................................................................................................................
...............................................................................................................................................

2. A list with the names of the shareholders is kept in a stock ledger. (SETS)
...............................................................................................................................................
...............................................................................................................................................
...............................................................................................................................................

3. Directors can be removed by the shareholders. (ENTITLED)
...............................................................................................................................................
...............................................................................................................................................

4. The company has to be registered at the Companies House. (NECESSARY)
...............................................................................................................................................
...............................................................................................................................................

5. The Board has to hold at least one meeting each quarter. (REQUIRED)
...............................................................................................................................................
...............................................................................................................................................

6. In addition to receiving a dividend, stockholders are entitled to vote at meetings. (NOT ONLY …
BUT)
...............................................................................................................................................
...............................................................................................................................................
...............................................................................................................................................

7. It is difficult to set up a limited company because of the amount of paperwork involved. (MAKES)
...............................................................................................................................................
...............................................................................................................................................
...............................................................................................................................................

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2. Past tense modals (C1)
1. Tom authorised the payment and he was not allowed to do that. (SHOULDN’T)

...............................................................................................................................................
...............................................................................................................................................

2. Barbara drew up new bylaws but it wasn’t necessary. (NEEDN’T)
...............................................................................................................................................
...............................................................................................................................................

3. Verb review 1

Complete the following sentences with a suitable verb from this unit in the correct form. LE 2.14
1. If the company becomes insolvent, it__________________________ up.

2. As a sole trader you will be totally responsible for _________________ the business.

3. When a sole trader dies, the business _________________ to exist.

4. The Company Registrar will verify that the Company _________________ all the registration
requirements.

5. I am pleased to _________________ you with the information requested.

6. A public limited company can _________________ capital by_________________ shares.

7. General partners are liable not only for the debts _________________ but also for the actions
_________________ against the firm.

8. We have decided to _________________ our business as a limited partnership.

9. The shares of a private limited company can only _________________ with the consent of the existing
shareholders, which _________________ it easy to control the ownership.

10. Sleeping partners _________________ from limited liability but do not _________________ in the running
of the business.

11. General partners jointly _________________ both the management and the profits of the business.

12. The partnership agreement _________________ the percentage of the profits which corresponds to
each partner.

13. All limited companies must _________________________________ at the Companies House*. (*NOTE. This
is the name of the Registro Mercantil in the UK. Other terms that can be used are the Registry of Companies
or the Company Registry.)

14. The bylaws _________________ out the duties of the CFO.

15. Once the constitutional documents _________________ with the Registrar and the fees
_________________, the company can commence _________________

16. Inditex _________________ on both the Spanish and NY stock market.

17. A limited company (not) _________________ when a shareholder dies as it is a separate legal entity.

18. We are afraid that the business may _________________ insolvent as we are having difficulty
_________________ our expenses.

19. The Articles of Association _________________ for the election of the Directors.

20. The bylaws _________________ how many shareholders _________________ a quorum.

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21. The CFO should _________________ accurate accounts of the money spent, but he failed to do so.
22. The shareholders were very happy because the company _________________ a dividend of $1.25 at

the AGM yesterday.
23. A special meeting _________________ for the first week of next month..
24. Those that cannot vote in person can _________________ their vote by registered mail.
25. The Secretary should _________________ the minutes, but as she was ill the President did it so that

there would be a record of all the business _________________ at the meeting.
26. I _________________ a copy of all my travel expenses to the CFO so that he can approve them and

return the money I spent on my business trip.

4. Nominal Structures
Rewrite the following sentences using the word(s) in brackets and transforming the corresponding
verbs to nouns.
Example: Peter joined the mergers and acquisition department of a large international law firm

when he graduated. (UPON)
Upon graduation, Peter joined the mergers and acquisitions department of a large
international law firm.

1. Amendments to the bylaws must be approved by the stockholders. (SUBJECT TO )
.................................................................................................................................................................................................
.................................................................................................................................................................................................

2. The bylaws contain provisions regulating how the directors should be elected and removed.
(PROVIDE FOR )
.................................................................................................................................................................................................
.................................................................................................................................................................................................

3. Before a company name can be registered, a name clearance must be carried out. (PRIOR TO)
.................................................................................................................................................................................................
.................................................................................................................................................................................................

4. Once the required fees are paid, the Companies House will issue a Certificate of Incorporation.
(UPON)
.................................................................................................................................................................................................
.................................................................................................................................................................................................

5. Even if the ownership changes, a company will continue to exist. (REGARDLESS OF)
.................................................................................................................................................................................................
.................................................................................................................................................................................................

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5. Verb review 2

a. Put the appropriate verb in the appropriate tense and form in the gaps below.

benefit - declare - incur - limit - list - meet - pay out
register - run - submit - trade - transfer

1. Once a public limited company meets all the registration requirements, it can
apply to be listed on a recognized stock exchange.

2. A limited company must submit certain documents to the Registrar of LE 2.15
Companies before it can commence trading .

3. A shareholder is only liable for the debts incurred by a company to the extent of his stake
in the business.

4. You may want to limit your liability by registering your business as a private limited
company.

5. Shares in a private limited company can only be transferred from one shareholder to
another with the prior consent of the existing shareholders.

6. A company is run by a board of directors.

7. In both public and private limited companies, shareholders benefit from limited liability.

8. Should a company show a profit, it may decide to declare and pay out a dividend.

9. Generally, a private limited company is limited to a maximum of 50 members.

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b. Transform the verb below to negative form________________ and indicate the type of business
structure being described in each case in the box.
1. a) A sole proprietorship is dissolved when an owner dies.

b) A limited company is not dissolved when an owner dies.

2. a) A limited company has to pay corporate tax.
b) A sole trader ________________________ to pay corporate tax.

3. a) A sole trader will have to pay for any debts incurred with his personal assets (if the
assets of the business do not cover the money that is owed).
b) A A sole trader __________________________ for any debts incurred with his personal
assets.

4. a) A partnership ceases to exist upon the death of a partner .
b) A partnership ________________ to exist upon the death of a pa rtn er

5. a) Ownership in a public limited company can be easily transferred.
b) Ownership in a private limited company ____________________________ easily transferred.

6. a) It is easy for public limited companies to expand because they can issue shares to raise
capital.
b) It _____________________________ for PARTNERSHIPS/SOLE TRADERS to expand because they
___________________________ issue shares to raise capital.

7. a) Public limited companies have to meet a minimum share capital requirement.
b) PRIVATE LIMITED COMPANIES ____________________ to meet a minimum share capital
requirement.

8. a) In a limited partnership, the general partners participate in the running of the business.
b) In a limited partnership, the SLEEPING partners _________________________ in the running
of the business.

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6. Verb review 3

In this unit you have seen many formal verbs. Complete the following sentences by LE 2.16

choosing the correct verb from the box below and writing it in the space provided in the correct form

(ACTIVE OR PASSIVE / INFINITIVE / GERUND), i.e. it may be one or two words.

amend convene file issue cease confer differ dissolve

enable entitle exercise grant limited make meet

provide require resemble set(3) transact vest

a) Types of business organizations - advantages and disadvantages

1. Setting up a private limited company enables you to control who can own shares in your

company.

2. If you set up a PLC, you will have to meet many requirements, which will make it

more complicated and time-consuming to set it up.

3. Given that it is a separate legal entity, a limited company is not dissolved (= it does not

cease to exist) when a member decides to leave the company.

4. A PLC is required to file its annual audited accounts with the Registrar of Companies.

5. A shareholder's liability is limited to the amount s/he has invested.

6. A sole proprietorship differs from a general partnership in the number of members.

7. A sole proprietorship resembles a general partnership in that the owners of both have

unlimited liability.

b) Setting up a company/ Language of Legal Documents

8. The Articles of Association of our company grant the Board of Directors the right to divide

the shares into different series.

9. Only ordinary shareholders are entitled to vote at an annual general meeting.

10. All the business to be transacted at the AGM must be set out in the agenda for the

meeting.

11.Under the Articles of Association of our company, the power to appoint a chairman is veste d

in or is conferre d upon the Board of Directors.

12. If the company wishes to increase the authorised share capital, the present articles will have

to be amende d .

13. Special meetings must be convene d at least 10 days before they are held.

14. The Articles of Association provid e for the appointment and removal of directors.

15. Under the Companies Act 1985, in a plc, new shares cannot be issue d to the general

public unless existing shareholders have first been given the option to purchase them in
proportion to their current holding.
16. This option contract gives you the right to buy 100 shares at $1.25 on or before June 10, 2018,

but you are under no obligation to exercise this right.

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7. VOCABULARY REVIEW. Description of a PLC.
Supply the missing verbs in the correct form.
A public limited company (PLC) is a separate legal entity whose members
(1)_________________________ from limited liability. Thus the company (4)
_________________________ (negative verb) when a member dies or sells his/her shares, which
can be freely and publicly (2) _________________________, and the number of shareholders (3)
_________________________ (negative verb). A public limited company can (5)
_________________________to (6) _________________________ on the Stock Market. A public limited
company must (7) _________________________ with several requirements. It must have an
authorised and issued share capital of at least £50,000, 25% of which must (8)
_________________________ up. This type of company is also (9) _________________________ to have
at least two members and two directors as well as a professionally qualified Company
Secretary. In addition, it has to (10) _________________________ its annual audited accounts
with the Registrar of Companies.

8. Online quizzes on LEGAL BUSINESS STRUCTURES LE 2.17
a) Choosing a legal structure LE 2.18

b) Legal structure of a business: Basics

c) Sole traders and partnerships

d) Limited companies

e) Differences between a private and a public limited company (online
only)

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10. FIND THE ERROR
Find and correct any language or information errors you find in the text below.

Legal Structures for a Business

There are various legal structures available for a business.

A sole trader is a business owned by one person. The sole trader hasn’t to work alone – he
or she may also employ other people. The term “sole trader” relates to the ownership of
the business.

There are an amount of advantages and disadvantages to setting a business as a sole
proprietorship. It is difficult and time-consuming to set up a business as a sole trader.
Moreover, a sole trader has more flexibility and can adapt more quickly to market trends
than other types of business. Also, he has to work long hours and usually gets few
holidays. A further backdraw is that it is often hard to rise capital for expansion.

A general partnership is a form of business in which at least three people agree to work
together and share the benefits of the partnership. Partners resemble to sole traders in
that they are fully and personally liable. The rights and responsibilities of the partners are
generally set up in a partnership agreement or deed.

Unlike sole proprietorships and partnerships are unincorporated businesses, the most
common form of incorporated business is the limited company.

A company is owned by its stakeholders, who may also be involved in the day-to-day
management of the business. Private limited companies can raise capital by selling shares
on the stock market, which makes easier for them to raise finance than unincorporated
businesses.

The owners of a limited company are called shareholders or partners. They have limited
liability that means that the shareholders can only loose the amount that they have
inverted in the company.

115

116

3 – BUSINESS CONTRACTS

A. Introduction to Contracts
1. Together with a partner, write at least 10 words you might use when dealing with legal issues
involving contracts.

2. Working with a partner, discuss the following questions.
1. Can anybody enter into a contract? Do some people lack the legal capacity to enter into a

contract? Is contractual capacity limited in some cases?
2. Have you ever entered into a contract? If so, what kind of contract?
3. Have you ever read a written contract in Spanish or English? If so, how would you describe the

language used?
4. Give 3 examples of business transactions which would require a written contract.
5. Do all contracts have to be made in writing?
6. Which branch of law regulates contracts?
7. What is the role of the courts with respect to contracts?
8. What elements are necessary for a contract to be formed?
9. When negotiating contracts, do both parties have equal bargaining powers?
10. What usually happens if one of the parties breaches a contract?
3. Together with a partner, write a simple definition of a contract.

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Forming a contract

a. Read the following text and do the exercises below.

A contract is a binding agreement between two parties, and thus it is enforceable by the courts. Several
elements are required in order for a contract to be formed. There must be a valid offer made by the offeror
to the offeree, containing language of commitment and terms which are reasonably certain. There must be
an unqualified acceptance, which in most cases must be communicated to the offeror. Intention to create
legal relations is a further element needed for a contract to be enforceable. In the case of commercial
agreements it is presumed that such intention exists. Finally, under both American and British law all
contracts need consideration unless the contract is made in the form of a deed. Consideration is the price
each party pays for what they receive under the contract. It is usually money or the exchange of goods or
services.

Not all contracts are in writing. Many everyday transactions are in fact verbal contracts. However, some
contracts, such as those involving the sale of real property, have to be in writing. Written contracts are
executed when they are signed.

When the parties to a contract comply with the terms of the contract, they are performing the contract.
Once the contract has been duly performed, the contract is discharged. However, if either party fails to
comply with any of the terms, the non-breaching party can bring a claim for breach of contract and
may be entitled to terminate the contract. If the claimant succeeds in establishing the liability of the
breaching party, the courts will award an appropriate remedy, usually damages.

b. Find words or expressions in bold in the text which mean the same as the following:

__________________________ a. creating a legal obligation LE 3.1
__________________________ b. land or buildings

__________________________ c. written

__________________________ d. capable of being made effective

__________________________ e. somebody who has suffered a breach of contract or another type of
civil wrong

__________________________ f. as established / properly

__________________________ g. business deals or agreements

__________________________ h. complying with their contractual obligations

__________________________ i. take legal action

__________________________ j. legal solution aimed at compensating the infringement of a right

c. Complete the following table. VERB ADJECTIVE LE 3.2
NOUN bind enforceable

breach presume liable
termination comply
commitment form
perform

execute
reject

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d. Below you will find a series of statements made by lawyers to their clients. Complete
them by filling each gap with a suitable word from the box on the previous page.

a. I think the terms are both reasonable and clear. LE 3.3
Therefore, there is a good chance that the court
will ___________________ the contract if you b. Make sure you read all the provisions carefully
decide to file a lawsuit. because, once you sign the contract, you will be
____________________ by all the terms.

c. If your wife decides to take this to court, d. In a similar case we handled last month, the consultant
she’ll have to prove that you intended to was found __________________ for breach of contract and
enter into a binding agreement. In family the non-____________________ party was awarded
agreements, there is a _______________ $25,000 in damages.
that the parties do not intend to create legal
relations. e. In this case, lack of _____________________ with
the terms of a contract could lead to litigation as the
f. The agreement will become effective upon contract does not provide for arbitration.
_______________ of the contract and will
remain in force for 5 years.

g. As your agent has breached an essential
clause, under the terms of the contract you are
entitled to _____________________ the
agreement with prior written notice.

h. An oral contract
_____________________ at the moment
both parties assent to the terms of the
agreement.

i. You should have read the clauses
more carefully. Your company has
_____________________ itself to
submitting all conflicts to binding
arbitration, so you cannot refuse to do so
now.

j. This e-mail cannot be construed as
an acceptance of your offer. As your
customer is asking you to modify the
terms of payment you included in your
offer, it is really a __________________
of your offer.

119

Frequently Confused Words

Language note

1. undertake / agree
These verbs are frequently used to indicate obligations. Look carefully at the structure used
with each one.

 The Company hereby undertakes / agrees to deliver the goods by October 10th 2014.
 NEVER SAY The company accepts to deliver the goods.

2. force ≠ enforce
force = oblige = this verb needs a person as the complement = to force/oblige somebody

to do something.
enforce = this verb needs something (the contract / a law / a regulation/ a rule ) as a

complement.
 If Mr Mallory does not want to renew the contract we will have to look for a new supplier. We

can’t force him to renew it.
 We won’t be satisfied with just damages. We hope the court will enforce the contract.

3. term ≠ terms
term = duration, validity of a contract; period of time during which a contract is valid
terms = conditions or provisions contained in a contract

 This Agreement shall be for a term of five years, commencing on April 14, ...
 The terms set forth in this Agreement are the exclusive terms governing the License granted by

the Licensor.

4. form a contract ≠ perform a contract
form a contract = create a contract
perform a contract = comply with the contractual obligations

 When Peter offered to paint the house for $500 and Mrs Smith accepted the offer, they actually
formed a binding oral contract.

 Once Peter painted the house and Mrs Smith paid him, the contract was completely performed.

Do Worksheet 3.1

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Types of Contracts

As you know, a contract is an agreement between two or more parties. Below you will find a list of
contracts commonly found in business transactions. Sometimes the parties are identified throughout
the contract with an abbreviated form of their name. Other times they are given a name at the
beginning of the contract which indicates their specific role. Below the grid you will find terms
frequently used to identify the parties.

1. Complete the table below as you look at the Power Point Presentation Moodle
your teacher explains to you. Unit 3 PPT 3.1

Type of contract Translation Party A Party B Form of
payment

lease arrendamiento lessor lessee rent
agreement

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2. Below you will find definitions for the twelve contracts on the previous page. Fill in the
blank spaces and then match the definition with the types of contract.

1. ______________ = an agreement which es______________ the t______________ LE 3.4
and conditions of employment.

2. ______________ = an agreement by which a middle-man is authorised by a manufacturer or supplier
to sell products to a re______________, who then sells the products to the end customer.

3. _____________ = an agreement by which the o______________ of stock is transferred from the seller
to the purchaser.

4. ______________ = an agreement whereby one party l______________ money to another party.

5. ______________ = a contract by which one party, the principal, authorises a second party, the
agent, to act on his or her b______________ and to b______________ the principal by his or her
actions or words.

6. ______________ = an agreement whereby a party is gr______________ the right to
pr______________ services or sell goods under a certain name or trademark.

7. ______________ = a contract by which the o______________ of some property grants to another
party the right to possess and use it for a sp______________ period of time in exchange
f_______________a price, known as the r______________ .

8. ______________ = agreement by which a party with recognised experience and expertise in a field
undertakes to p______________ consulting services to a second party in exchange for a
compensation which is either paid as a fixed sum for a certain period of time or at an hourly rate ,
which is also referred to as a f_____.

9. ______________ = an agreement by which money is lent to one party, usually to buy property, and
interest in that property is offered as security for the p_______________ of the debt.

10. ______________ = a contract whereby the o______________ of goods is transferred from the
seller to the buyer for a fixed price which the buyer agrees to pay.

11. ______________ = an agreement by which the owner of intellectual property, such as a
p______________ or copyright authorises a second party to make, use or sell the intellectual
property for a limited p______________ of time in a limited territory in exchange for a sum of money
known as r______________ .

12. ______________ = an agreement whereby two or more parties come together to work on a common
project, where both contribute assets and share the risks, profits and l_____________.

Language note

whereby = by which

 We have entered into an agreement whereby we are granted the exclusive
right to distribute HM’s products in India.

122

B. Language of contracts
Reference words: Here and There
In contracts you will frequently find complex words formed by one of the words above and a
preposition. Here always refers to the contract itself and there always refers to something
previously mentioned. We only use these complex reference devices when writing formal
documents, never when explaining them orally to a client.

Prepositions in contracts
a) Insert the missing preposition in the sentences below.
1. A copy of the document is attached _________ this agreement.
2. This Agreement commences on the date of execution _______ this agreement.
3. If any provision or any part _______ the provision is construed to be invalid, such

provision shall be separated from the remainder of the contract which shall continue
in full force and effect.
4. The parties agree to the terms of the License and all conditions established ___________
the agreement.
5. The parties _______ this contract agree that the remedy at law for any breach of this
Agreement will be inadequate.
6. Licensee agrees to the terms and conditions of use ("Terms") contained _________ this
agreement.
7. Unless otherwise established _______ this agreement, any notice, request, instruction
or other document to be given to any party (or other person referred to _______ this
agreement) shall be in writing
8. … in compliance with standards for products and the labelling ______ the products.
9. The contract shall be in effect for five years and _______ that time shall be automatically
renewed unless terminated with three months’ prior written notice.
10. Any breach not remedied by Agent within twenty days of receipt of notice _______ the
breach shall constitute cause for immediate termination.

b) Look at the above sentences again and replace the highlighted phrase with a HERE-THERE
EXPRESSION.

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c) Below are some excerpts taken from contractual clauses. Next to each one write how you would
explain the underlined words when speaking. Then identify what kind of contract the clause is from.
Example

This agreement shall be binding upon the parties hereto.
binding on the parties to the contract. /or/
binding on the parties who have entered into the contract.

1. Executive shall also be entitled to reimbursement for reasonable expenses duly incurred by
Executive in the performance of his duties hereunder.

2. Seller hereby undertakes to transfer and deliver all the goods specified in Schedule B on or
before June 30, 2014.

3. Agent shall be responsible for the marketing and sale of the Product, including presentation and
packaging thereof.

4. The license hereby granted extends only to the Territory specified in Schedule C hereto.

5. Neither party shall be liable to the other for failure to perform its obligations hereunder
caused by circumstances beyond its reasonable control.

6. Tenant agrees to permit Landlord or its Agents at all reasonable times to enter the premises
and examine the state of repair and condition thereof.

7. Agreement made between TGI Friday’s Inc … (hereinafter “the Franchisor”) and Carlson
Restaurants Inc… (hereinafter “the Franchisee”).

8. The Participants hereby constitute themselves as a Consortium for the purpose of preparing
and submitting the Proposal for the Project to the Client and thereafter negotiating and if
successful entering into and performing the Contract with the Client.

9. The Company may execute a transfer of the stock in favour of the person to whom the stock is
sold and he shall thereupon be registered as the holder of the share.

10. This agreement shall continue in full force and effect for a period of 3 years from the date
hereof and shall thereafter be renewed automatically on a year to year basis provided always
that the Distributor shall have achieved a level of sales to the satisfaction of the company within
such periods and also subject to the provisions for termination hereinafter appearing.

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d) Look back at clauses 2, 3 and 6 and complete the following grid with the verbs used to establish a
contractual obligation.

The  __________________________ to do something
(party)  __________________________ do something
 __________________________

What verb would you use in everyday English to explain a contractual obligation?
The Agent _________________ inform the Principal of all orders received from outside the territory.

e. Below are some formal words used in the clauses you have just seen. After each word
put the letter of its corresponding definition.

LE 3.5

1. reimbursement ____ a. annex to a contract

2. duly ____ b. merchandise, products

3. territory ____ c. protective covering for a product

4. premises ____ d. the repayment to somebody of money they have spent or lost

5. renew ____ e. in the way established; in a proper way

6. packaging ____ f. a defined geographical area

7. goods ____ g. building and land it is on

8. schedule /exhibit ____ h. to extend the validity of a contract or legal document

Compound adverbs/ prepositions.

The following compound adverbs and prepositions are only used in
written legal documents. They are not used when speaking.

HERE

herein = in this contract

hereby = by means of this contract

hereunder = (rights and obligations) established under this contract.

hereof = the date of the contract

hereafter = from the moment established in this document onwards
in time

hereinafter = from that point throughout the rest of this document

hereto = attached to this contract

THERE

thereof = of something mentioned before
therein = contained in the place mentioned before.
thereto = to something mentioned before.

 Licensee shall pay royalties with respect to said period and provide
statements with regard thereto in accordance with the terms
hereunder.

125

f. Complete the following extracts from contractual clauses by underlining the correct LE 3.6
compound reference word.

1. Licensor hereby / hereto / thereby / therein grants to Licensee the
exclusive rights to manufacture, produce, use, transfer and sell the Licensed
Products.

2. The term of Employee’s employment (hereto / hereinafter / herein / hereunder
referred to as “Term”) shall commence on January 1, 2010 and shall continue until
December 31, 2015 unless terminated as provided in Paragraph 10 of this Agreement.

3. Franchisee shall at all times treat the Manual and the information contained thereafter
/ thereof / therefore / therein as confidential.

4. It is intended by the parties hereby / hereto / thereby / thereto that this document
shall take effect on January 1, 2011.

5. Any breach not remedied by Franchisee within twenty (20) days of Franchisee’s receipt
of written notice hereto/ hereof / thereof / thereto from Franchisor shall constitute
cause for immediate termination.

6. If any of the covenants in Paragraph 7(a) or any part thereby / thereafter / therefore
/ thereof is construed to be invalid or unenforceable the same shall not affect the
remainder of the covenant or covenants, which shall be given full effect, without regard
to the invalid portions.

7. “Territory” shall mean the countries set forth in Schedule B hereafter / hereby /
hereunder /hereto.

8. Running royalty shall be computed and paid every six months, terminating the last day
of each six-month period (the first period shall begin as of the date herein / hereto /
hereof / hereafter).

9. Tenant may not install any equipment without Landlord's prior written consent, which
Landlord may withhold if Landlord reasonably determines that such equipment is not
suitable for the Building or may not safely be used herein / hereon / therein/ thereon.

10. The Agent shall promptly inform the Principal of any purchase for its own use and all
relevant details relating therewith / thereto / hereto / herein.

126

g. Complete the gaps using a formal compound reference word formed with an
adverb+preposition. (herein, thereafter, etc) .

1. This agreement is made between James Sullivan, ( ______________________ called the LE 3.7
Tenant) and Margaret Kennedy, ……

2. This agreement shall be for a period of two years from the date ______________________ and
shall _________________________ be renewed for further successive periods of two years.

3. Any product referred to _____________________ shall remain the property of the Supplier until
Customer pays for said product in full.

4. "Developed Technology" means any and all data or information whether tangible or
intangible which is necessary to make or use Lead Compounds, or to develop, make, use
or sell Collaboration Products based ________________________.

5. In consideration of all the agreements ________________________ the parties
________________________ agree as follows: …

6. The Company guarantees that the Products shall be free of defects for a period of 12
months from the date of delivery _______________________ to end customers.

7. Industrial Property Rights shall mean any and all rights under patents, trademarks and
copyrights presently owned or _______________________ acquired by Licensor.

8. "Business Plan" shall mean the business plan attached _______________________ as Schedule A,
covering the period commencing on the date _________________________ and ending on June 30,
2015.

9. Any payments which are made to Licensor after the due date established
_____________________ shall bear interest at the rate of fifteen percent (15%) per annum.

10. The Agent shall advise the Principal frequently as to the most advantageous marketing
strategy for the Product, including presentation, packaging and grading
________________________.

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Vocabulary review
1. Together with a partner discuss the difference between the following pairs of terms.
 gross profit / net profit
 a commitment / a binding obligation
 on May 5, 2011 / by May 5, 2011
 to form a contract / to perform a contract
 prior written consent / prior written notice
 force / enforce
 expiration / termination

2. Below are common collocations found in commercial contracts. Match the verb in A to the
appropriate expression in B and discuss with a partner in which sort of contract(s) you would
find each collocation.

Column A Column B

1. grant a) a service / information

2. transfer b) a salary/ royalties/ a fee / rent / interest / a commission

3. pay c) goods / products

4. provide d) a right to another party

5. act e) ownership

6. sell/ distribute /deliver f) on behalf of somebody

128

LANGUAGE USE 1. Conditions and contingencies

1. Establishing a condition in a contract
Read the following clauses taken from different distribution agreements and do WORKSHEET 3.2.
CLAUSE ONE
This agreement shall continue in full force and effect for a period of 5 years and shall thereafter
be renewed automatically on a year to year basis provided that the Distributor shall have achieved
a level of sales to the satisfaction of the company within such periods. Any renewal shall be
subject to the provisions for termination hereinafter appearing.

CLAUSE TWO
The term of this agreement shall commence upon execution of this agreement and shall expire
on the date set forth in Schedule I unless it is sooner terminated as provided herein.

CLAUSE THREE
The Distributor may assign its rights hereunder to a related corporation so long as the owner of
such corporation is the Distributor.

2. Establishing a possible contingency in a contract
Read the following clauses regarding termination taken from different license agreements.
CLAUSE ONE
This agreement shall be terminated in case of insolvency of either party.
CLAUSE TWO
This license shall terminate in the event that the governmental regulations render* the
performance of this contract impossible.
CLAUSE THREE
In the event of early termination for any reason whatsoever prior to the expiration of the term,
Licensee shall have no right after such termination to manufacture, sell or dispose of any of the
Articles licensed hereunder without Licensor’s express written consent.
* Render = make (make the performance impossible)

Do Worksheet 3.2

129

3. The condition of prior notification

Frequently a contract establishes that a party to the contract has to inform the other party before
doing something. This may be expressed using:

subject to + NOTICE

 Upon expiration the agreement shall continue in full force and either party shall be entitled to terminate
the contract with two months’ notice*.

 The prices quoted in Schedule One hereto may be modified subject to 3 months’ prior written notice.
 Either party may terminate the agreement as long as it provides the other party with two months’ prior

written notification.
* Sometimes notification is used in this meaning, but notice is used more frequently.

the verb NOTIFY

 The Company may modify the prices provided that it notifies the Distributor in writing 3 months in
advance.

Be careful with:

 the use of NOTIFY.  Not notify +something

 Notify + somebody +of +sth

 The Tenant agrees to notify the Landlord in writing of any damage.
 the use of NOTICE

Notice is only used as a noun in this context. The verb notice has a different meaning.

 The Tenant has to give the Landlord written notice.
 The Tenant has to notice the Landlord in writing.

Practice 1
ERROR CORRECTION. Find and correct the mistake in each of the following sentences.
1. In the event of breach the Franchisor may terminate the contract with a ten days’ prior written

notice.

2. Upon expiration of the term, the Licensee may exercise its option to renew the Agreement
provided that it notices the other party 20 days prior to expiration.

3. Neither party may assign its rights hereunder unless the prior written consent of the other
party.

4. Purchaser shall notify any changes in the order at least 10 days before shipment.

5. Agent shall promptly notice Principal by writing if any of the goods are damaged in the course
of transportation.

6. In case that Licensee fails to submit a prototype of each Article within two months of execution
hereof, Licensor may terminate the contract immediately.

7. Licensee may advertise the Articles on television unless it has obtained Licensor’s prior written
approval.

8. Prices may be modified by Distributor provided the Company’s prior written consent.

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Practice 2
Practice using these structures by rewriting the sentence using the word in brackets.
1. The Licensee may exercise the option to renew the contract provided that it gives the Licensor

at least 30 days’ written notification prior to expiration. (NOTIFIES)

2. In the event of breach either party may terminate the contract immediately by notifying the
other party in writing 20 days in advance. (WITH)

3. The Landlord may enter the premises to inspect the state thereof provided that it notifies the
Tenant twenty four hours in advance. (SUBJECT)

 Listening 3.1 - A contract dispute(B1/B2)

1. You are going to listen to a dispute regarding a sales contract and prior notification. Before doing
so:

 read clause two from the contract and complete the sentences explaining the parties’
obligations in your own words.

 discuss with your partner what problems could arise with regard to this clause.
2 a. The Buyer undertakes to designate the date of shipment.

b. The Buyer undertakes to provide the seller with a minimum of two weeks’ notice of
probable readiness of the vessel(s) and of the quantity to be loaded.

c. Upon notification of probable readiness of vessel(s) the Seller undertakes to
designate a port for loading the goods.

d. The goods shall be shipped by March 15, 2011.

Buyer has to …
Seller has to …

131

2. Listen to the conversation between Mr. Jenkins, the lawyer, and Frank Stevens, the Director of the
company selling the goods (the Seller) and answer the following questions.
a. Who are the buyer and seller in this dispute?
b. Why does the seller wish to terminate the contract?
c. What is the difference between a warranty and a condition?
d. What legal remedy is available to the non-breaching party in the event of breach of warranty?
e. What legal remedy is available to the non-breaching party in the event of breach of condition?
f. Does the lawyer feel that the seller is entitled to terminate the contract?
g. On what does the lawyer base his opinion?
3. Below is an excerpt from the e-mail the lawyer sent to Mr Stevens summarising their discussion. Fill
in the blank spaces with a suitable formal word. You may need to use some words more than once.
According to what you explained, Drexler agreed to p_________________ a large quantity of
g_________________ from your company. Under Clause 2b they a_________________ to n_________________ you
two weeks p__________________ to the date of shipment s_________________ that you could make
arrangements for the l_________________of the g_________________. However, you were unable to make the

arrangements, as Drexler f____________________ to
duly n_________________ you. C_________________, you
now wish to t_________________ the contract.

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LANGUAGE USE 2: Expressions related to breach

Breach
Breach and words formed from can be used in the following ways:.
1) VERB

 If you breach a condition of the contract, the Franchisee is entitled to terminate the Franchise
agreement. (=fail to comply with)

2) NOUN
 We will have to prove there is a breach of condition.
 You will be able to claim damages to cover any costs you have incurred as a result of this
breach.

3) ADJECTIVE
 The fact that Drexler is in breach of the contract does not necessarily mean you can terminate
the contract.
 In the event of breach of condition, the non-breaching party may terminate the contract and
sue for damages.

Default
Default and words formed from can be used in the following ways:.
1) VERB

 In the event that a customer defaults on payment, any commission that has already been
paid must be refunded. (= fails to pay)

2) NOUN
a. Under a mortgage agreement, the bank can take possession of the house in the event of
default on payment. (= a failure to pay / a breach)

3) ADJECTIVE
 If you are not in default when the contract expires, you will be able to dispose of the goods for
60 days.
 In the event of default, the defaulting party’s scope of work can be assigned to another
company.

Remedy
Remedy and words formed from it can be used in the following ways:
1) VERB

 If such defaults are not remedied* to the Principal´s satisfaction within twenty days after
notice of such defaults, the Principal may terminate the contract by written notice.
(* in contracts the verb cure is also used with the same meaning but repair is NEVER used.)

2) NOUN
 Whereas the most common remedy for breach of contract is damages, the remedy for
nuisance is usually an injunction. (= legal solution)

133

Below you will find clauses from contracts. Fill in the blank spaces with the correct form of one of the
words in the previous box.
1. Manufacturer may terminate this agreement with 20 days´ written notice if Distributor

___________________ any of the terms hereunder and fails to _______________________ such ______________
within 10 days of notice thereof.
2. In the event that Licensee is in _______________________ with the payments on the due date, Licensor
may terminate the Agreement provided Licensee’s _______________________ has not been
_______________________ within 15 days of notice by Licensor.
3. Either party shall have the right to terminate this Agreement forthwith if the other commits a
_______________________ of any of the terms or conditions hereunder.
4. In the event that Licensee fails to actively market any of the Articles, Licensor, in addition to any
other _______________ available hereunder, may terminate the license granted.
5. Either party may terminate this agreement immediately by written notice if the other party
_______________________ any material term or condition and fails to _______________________ the
_______________________ within 30 days.

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LANGUAGE USE 3: Uses of provide

Uses of Provide
Provide can be used with the following meanings:

1) As a subordinating conjunction (provided / providing)
 on condition that (a condición de que / siempre que)

2) As a verb:
a. to establish (establecer / disponer)
b. to give or provide (dar / facilitar / suministrar / proporcionar)

3. As a noun (provision)
 a clause or stipulation (cláusula / disposición)

Read the following sentences and decide which of the meanings of PROVIDE is being used. (1,
2a, 2b or 3)

1. You may revoke this Power of Attorney at any time by providing your Agent with written LE 3.8
notice.

2. Providing that Licensee has complied fully with all its obligations hereunder, it shall have the
right to sell any Licensed Article for a period of 60 days upon termination of the contract.

3. These Services shall be provided in line with Group policy.

4. My agent is authorised to provide any information requested by the government in connection
with social security benefits.

5. The Unfair Contract Terms Act 1997 contains complex provisions limiting the extent to which a
person can exclude or restrict his business liability towards customers.

6. The Licensee may exercise the Option to Extend provided that Licensee provides Licensor with
at least 30 days’ written notice prior to the Initial Term Expiration Date.

7. If the parties make no specific provision as regards delivery, they are presumed to have opted
for Ex Works at the seller’s place of business.

8. The Income and Corporation Taxes Act 1988 provides that for the purposes of tax a person who
has left the UK for temporary residence abroad is still a resident in the UK.

9. A seller must supply and the purchaser must accept a title deed of ownership unless their
contract provides otherwise.

10. Either party may modify the prices providing that prior written notice is given.

11. The licensee shall pay royalties as provided in Schedule B hereto.

12. Friendster may contract with a third party to conduct such research and marketing provided
that such third party will be fully bound by an obligation of confidentiality to Friendster and may
not use any personally identifiable information provided by Friendster other than as expressly
instructed by Friendster and in strict compliance with the terms of this Privacy Policy.

Do Worksheet 3.3

135

LANGUAGE USE 4: Verb Formation

There are many nominal structures in English that end in - ATION. However, the verbs formed from
these nouns are not always formed using –ATE. Many verbs have different endings. Look at the
following examples.

 termination  terminate
 diversification  diversify
 expectation  expect

Below is a list of nouns that end in -ATION which are frequently found in contracts or LE 3.9
other legal contexts. See how many verbs you can form correctly.

NOUN VERB
1. allegation
2. application
3. authorisation
4. cancellation
5. certification
6. communication
7. compensation
8. constitution
9. execution
10. examination
11. expiration
12. implication
13. indemnification
14. interpretation
15. justification
16. liquidation
17. modification
18. negotiation
19. notification
20. obligation
21. organization
22. quotation
23. regulation
24. revocation
25. satisfaction
26. specification
27. submission
28. stipulation

136

Legalese
As you have already seen, contractual clauses are complex and at times difficult to understand. For a
lawyer it is important to know how to interpret clauses and explain them in simpler language. The
objective is for you to be able to interpret a real contract for a client, which will be your final oral task
this semester.

Discuss

 What complex structures are frequently used in contracts but never when explaining them?
 What verb form is frequently used in contracts to establish an obligation but not used when

explaining the clause?
 Read the clause below taken from the employment agreement one company uses for all its

executives. Based on the clause, how would you orally answer the following question asked
by a potential new executive who might sign the agreement?
“What about any business expenses I may have?” (Do not use the

underlined words in your answer).

Upon submission of itemized expense statements, Executive shall be entitled to
reimbursement for reasonable travel and other reasonable business expenses duly
incurred by Executive in the performance of his duties under this Agreement.

 When speaking, what do we use more frequently: nominal structures or subject + verb?
Which of the following questions would you probably ask a colleague?
 What are you going to do when you graduate?
 What are you going to do upon graduation?

The language used in contracts is often referred to as legalese. Below is a summary of the features of
this type of language. We have already worked with some of these features and we will be looking
others in the following exercises.

 extensive use of prepositions, complex prepositions and nominal structures
 use of shall to establish binding obligations
 use of formal reference devices (here+preposition, there+preposition, the said, such, the

aforesaid)
 redundant expressions ( null and void, force and effect) and long lists of synonyms
 long complex sentences which do not always follow the standard order used in

everyday English and do not always use commas where you would expect them
 formal legal vocabulary
 technical words used in certain areas of business
 archaic words

137

Simplifying Legalese

Task One One of the first steps in explaining clauses in simpler language is to use subject + verb

structures instead of nominals. Practise this by expressing the following with a subject + verb.

Example For further practice with Nominalization, see Appendix 1.4

in the event of breach → if one of the parties breaches the contract

1. upon expiration of the term →....................................................................................................................................

2. subject to prior written notification→ ....................................................................................................................

........................................................................................................................................................................................................

3. in the event of default on payment →......................................................................................................................

........................................................................................................................................................................................................

4. upon complete performance → ..................................................................................................................................

5. in the event of late payment →....................................................................................................................................

6. upon receipt by the Agent of any order → ............................................................................................................

7. prior to termination of the lease →...........................................................................................................................

8. in the event of modification of prices →.................................................................................................................

9. prior to the delivery of the goods →.........................................................................................................................

10. subject to the Landlord’s approval →......................................................................................................................

11. in the event of the death of the employee →........................................................................................................

12. in the event of liquidation of the company →......................................................................................................

13. in the course of transportation of the goods →..................................................................................................

........................................................................................................................................................................................................

14. within 15 days of receipt of notice → ......................................................................................................................

15. in the event of Buyer’s dissatisfaction with the goods delivered → ........................................................

........................................................................................................................................................................................................

16. subject to the availability of instructors →...........................................................................................................

........................................................................................................................................................................................................

17. in the event of early termination of the agreement →....................................................................................

........................................................................................................................................................................................................

18. upon submission of expense statements (by Executive) →.........................................................................

........................................................................................................................................................................................................

19. without the Licensor’s prior consent → ...............................................................................................................

20. upon dissolution of the firm → ..................................................................................................................................

138

Task Two
Contracts frequently use redundant legal expressions which can
be explained with just one word or expression. This is especially
important to keep in mind when translating a contract into
Spanish.
With a partner decide how you would express the following
underlined redundant expressions.

1. This agreement shall commence on January 1, 2015 and shall
remain in full force and effect until December 31, 2017.
2. Any purported assignment in absence of such written consent
shall be null and void.
3. The Agreement shall be renewed automatically provided that the parties hereto have fully
complied with the terms and conditions hereunder.
4. Upon termination all amounts owed by Distributor to Manufacturer shall become immediately
due and payable.

Task Three
Another characteristic of contracts is the use of long lists of synonyms in order to cover all possible
contingencies. When explaining the clauses, you should try to sum up the list with just one word or
expression.
Practise doing this with the following clauses.

1. Both parties are excused from performance of their obligations hereunder if said non-
performance is due to war, armed conflict, civil disturbance, fire, explosion, accident flood,
industrial disputes, embargo or any other cause beyond the control of the parties
concerned.

2. In the event the agreement is so terminated, Licensee shall have no right to exploit or in any
way deal with the articles covered hereunder or any carton, container, packing or wrapping
material, advertising, promotional or display material pertaining thereto.

3. This agreement supersedes all prior written and oral agreements, contracts, promises,
understandings and commitments between the parties.

139

Task Four. Archaic reference words
Lawyers frequently use the following archaic words in contracts to refer back to something
mentioned earlier in the same sentence or earlier in the contract.
Read each clause and discuss :
 What kind of contract is the clause from?
 Who are the parties?
 What do the words in bold refer back to?
1. A statement of commission will be issued quarterly and forwarded to the Agent, and payment

falls due two weeks after said statement was issued.
2. Licensee agrees to pay to Licensor as a minimum guaranteed consideration against the

royalties to be paid to Licensor the sum specified in Schedule D hereto. Royalties in excess of
the aforementioned advance shall be due on the 15th day of the month following the
calendar quarter in which earned.
3. Payment must be made upon delivery of the goods. The only exception is where payment by
invoice has been agreed. In the event of payment by invoice, payment must be made within
30 days of receipt of the same.
4. The royalty set forth in Schedule C is based upon the net invoice amount for goods sold less
returns for defective merchandise. The aforesaid royalty shall be payable on all Articles
distributed by Licensee.

Do Worksheet 3.4

dispose of / disposal
A verb frequently found in contracts is to dispose of. The noun is disposal. It will usually have
one of the following meanings:
to sell or transfer

 Provided Licensee is not in default, it shall have the right to dispose of any Licensed Article for a
period of sixty days after expiration.

get rid of / the act of getting rid of something.

 The Agent undertakes to dispose of any spoilt Produce delivered by the Principal. The Principal shall
reimburse the agent for any costs incurred by the disposal of spoilt Produce.

140