Using the contract design scenario on the back of this page, students will be required to draft a contract incorporating sufficient terms for the protection of both the Manufacturer and Distributor of a sports spectator product. As this is a learning exerciseyou will be expected to draft the contract before we have completed the applicable chapter in the textbook.

The purpose of this exercise is three fold. First, Chapter 3 of the Textbook covers contracts from an academic point of view. This exercise will cover the practical aspects of drafting a contract. Second, we will familiarize ourselves with clauses found in extensive contracts and why they are there. Finally, we will gain an understanding of what lawyers do for us when they draft contracts and this will allow you to, at the outset, provide your lawyer with the information needed, thereby reducing your legal fees.

Contracts take three forms: oral contracts; written contracts; and those that are partly written and partly oral. In this exercise we will be preparing a written contract which may be in one of the following formats. Letter of Agreement- in which one of the parties (in this situation, most likely the distributor) writes a letter on his, her or its letterhead, incorporating the necessary clauses and asking the manufacturer to sign and return a copy of the letter, keeping the original for his records. Invoices - which would be the most common format for purchase and sale contracts but not appropriate for a distribution agreement of this nature. Most of the necessary clauses are found in mice type on the back of the invoice. The Formal Contract- which identifies the parties, sometimes includes recitals, generally has all the paragraphs numbered and ends with formal signature lines. Schedules are often attached after the signature lines but these must be referred to in the body of the agreement or they will not be considered part of the contract.

It is recommended that for this learning exercise the Formal Contract format and two precedents will be posted on the eLearn site. You download the precedents and use one or the other for the assignment. As these precedents are provided to you from CapilanoU resources, you have a limited licence to use it for educational purposes only. This means you may copy it verbatim without the worry of plagiarism or copyright infringement, but you may not use it for any reason other than for this assignment. Before using these precedents read them carefully to determine if all clauses and terms are applicable. Lawyers have precedents which they use to reduce the time spent on files, thus the precedent is not designed to fit every potential contract scenario perfectly. The lawyer must adjust the precedent to fit his or her client's specific needs. That being said, remember that it would be a poor precedent if a large number of terms or clauses had to be deleted. It may also be appropriate to add additional clauses. Leaving inappropriate terms or clauses in your contract will result in marks being taken off. Marks will also be deducted for grammatical, punctuation and spelling errors, although there should be few of those, given that most of the work is already in the precedent. When you are finished, save your work,e-mail your draft contract to me.

CONTRACT DRAFTING SCENARIO

Lawrence Da Vinci, a descendant of Leonardo Da Vinci, invented a motorized surfboard which allowed the rider to surf on lakes or rivers. He now owned and operated a business under the trade name of Hydro Surf Manufacturing to manufacture and sell his "HydroBoards" which looked like this:

The HydroBoard is powered by a inexpensive unique electric battery, which must be replaced every six months. Da Vinci sold the HydroBoards in the region around Nanaimo, BC. but only by way of word of mouth and a small advertising campaign in the local newspaper. This was because, as a journeyman electrician clerk, Da Vinci knew little about marketing, advertising or sales. So, he was elated when he was contacted by Cyril Soak who owned and operated a corporation called Water Soak Distributing Inc. Soak's company already distributed other types of water sports paraphernalia to numerous retail stores. Soak wanted to acquire the exclusive distribution rights for all of B.C. for the HydroBoard for his company. Soak had a well-known reputation as an excellent salesperson. However, while Da Vinci was anxious to deal with Soak's company, Da Vinci wanted to keep the lucrative Nanaimo market for himself. After months and months of negotiations, on October 16, 2021, they finally agreed as follows:

- exclusivity for all of B.C. excluding the area around Nanaimo currently being serviced by Da Vinci;

- the manufacturer is obligated to supply up to 200 HydroBoards per month and any replacement batteries whenever necessary;

- the distributor must sell an average of 50 HydroBoards per month in the first six months, an average of at least 75 HydroBoards per month in each of the next six months, and at least 100 per month after that;

- no minimum sales levels were required for the HydroBoards but the distributor had to ensure that retailers were provided with P.O.P. materials encouraging sales;

- Da Vinci, the manufacturer, also agreed to give Soak's company four demo HydroBoards;

- Da Vinci will deliver the HydroBoards to theWater Soak Distributing Inc.F.O.B. Nanaimo;

- the distributor agrees to buy the distribution rights to the above-mentioned territory for the sum of $35,000.00 to be paid by a down payment of $15,000.00 on November 16, 2021 and the balance in two installments of half the balance plus interest of 6.5% per annum, due on the 15^th day of each of the next two months.

Draft a contract attempting to be as fair as possible to each party, taking into account that Da Vinci is making a loan toWater Soak Distributing Inc. Set the document up for signatures. Make sure your name and section number are on the title page. Include your calculations of the interest payments as part of your contract. You may also assume additional facts by including a list of same, but do notchange any facts in theproblem.