13.2. Red Flag Contract Clauses

Try these first

1. 1.

   What is a red flag clause?

   Hint

   Think about why a warning sign is important in contracts.

2. 2.

   Why should excessive penalties be avoided?

   Hint

   Consider what would happen if a penalty is too high.

3. 3.

   What defines an excessive penalty?

   • A fair estimate of loss
   • A clause that is harsh and unreasonable
   • A mutually agreed upon penalty

   Hint

   Consider the consequence of harsh penalties.

4. 4.

   True or False: Open-ended indemnities protect the indemnitor from losses.

   • True
   • False

   Hint

   Think about the implications of 'open-ended'.

5. 5.

   Draft a contract clause that limits the liability for breaches to prevent excessive penalties.

   Hint

   Focus on including a cap to avoid harsh penalties.

6. 6.

   Analyze a case where ambiguous delay clauses led to litigation. What could have been done differently?

   Hint

   Reflect on the importance of clarity in communication.