When Two Parties Are Involved in a Misunderstanding as to the Meaning

question 9

Multiple Choice

When two parties are involved in a misunderstanding as to the meaning of a term of the contract, which of the following is usually applied by the court to settle the matter?

• A)The court will find that there is no contract because there is no meeting of the minds.
• B)Non est factum
• C)The most reasonable interpretation of the terms
• D)The equitable remedy of rectification
• E)Caveat emptor

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Definitions:

Convertibles

Convertibles are bonds or preferred stocks that can be converted into a predetermined number of common stock or equity shares.

Coupon Rate

The percentage rate at which a bond's face value accrues interest each year.

Straight Debt

A fixed-income security, such as a bond, that has a predetermined interest rate, maturity, and principal repayment schedule.

Credit Default Swap

A specific type of credit derivative where the underlying reference asset is a credit obligation such as a bond or a bank loan of a specific company. One counterparty (the protection buyer) makes a periodic payment (the credit default swap premium) to the second counterparty (the protection seller). If the underlying reference asset suffers a credit event such as bankruptcy, the protection seller will make a payment to the protection buyer. Credit default swaps allow protection buyers to hedge themselves against credit risk, and protection sellers to invest based on their assessment of credit risk.