Week 14- Contract Basics

 

Difficult Clauses to Be Aware of Contracts

 

-Dream Clause

-Non Competition Clause- New Change CA Jan 1, 2024 AB 1076

-Rights Clauses- Intellectual Ownership, copy rights, trade marks, all distribution rights

-Payment 30 days

-Force Majeure- unseen circumstances

-Indemnification Clause

-Arbitration

-Exclusivity Rights

-Disparagement Clause-(speak no ill)

-Receiving Credit

-Equitable Relief- (right to damages)

-Contract by state vs state the work was completed

-Inventions

-First right of refusal

-Severability Clause

-State of Legality

 

Without a severability clause, a contract could be deemed unenforceable because of a default on just one part of the contract. Sometimes though, severability clauses state that some of the contract’s provisions are so essential to its purpose that if they are illegal or unenforceable, the contract as a whole will be voided.  

• A severability clause in a contract allows certain parts to remain in effect even if others are illegal or unenforceable.
• Severability might refer to certain vital provisions that must be left intact.
• Severability clauses often contain savings language and reformation language.

 

Contract Basics

 Contracts are legal agreements between two parties or more. Legally binding contracts must have essential elements to be enforced in court. Some contracts that are missing one or two of these essentials will still hold up in a court, but it's best to have them all covered. 

 A contract is made basically any time one entity offers something to another and the offer is accepted. Think of the last time you accepted a job offer. The company offered you a job and you accepted, therefore a contract was formed. Employment contracts are one of the most common types of legal agreements. 

Contract Classification

Usually, the types of contracts you'll come across in the business world are classified as simple contracts. These can be made:

• In writing 
• Verbally
• With action
• To a witness

Bilateral contracts are one of the basics where both parties act to uphold the agreement. If one person promises something to someone else and that person agrees to give something in return, they've entered into a bilateral contract. When a product or service is sold and the customer provides payment, the company selling the item and the customer entered into a bilateral contract. 

 

Unilateral contracts are agreements where one party promises something in return for the action of the other. If you've even returned a lost dog for a reward, you've entered into a unilateral contract. The dog owner paid you a reward for the action of finding their pet. 

Offer

First, an offer must be extended in order to begin a contract. This should include details of the agreement and its terms and conditions. Simply put, the offer is the offeror's attempt at entering into a contract with another. 

 

Sometimes businesses will look for contractors through an invitation to treat by letting people know that they are interested in entering into a contract. 

Acceptance

Once the offer is extended, it's in the hands of the offeree to either accept or reject the proposal and its terms and conditions. Offerees can accept offers via mail, email, or verbally. 

 

Most states use the mailbox rule meaning that, if an offer is accepted via mail or email, the moment the acceptance is placed in a mailbox to be mailed or sent via email, it has officially been accepted. This holds true even if the offerer never receives the acceptance. Within this acceptance, there needs to be a clear statement that the terms of the agreement are all accepted. 

Meeting of the Minds

The meeting of the minds in contract law refers to the moment when both parties have recognized the contract and both agreed to enter into its obligations. This is also called:

• Genuine agreement
• Mutual agreement
• Mutual assent 
• Consensus ad idem (meeting of the minds)

Even after the parties have entered into the contract, it can be voided a few different ways including duress, undue influence, fraud, or misrepresentation. 

Consideration

Something of value must be exchanged in order to have a valid legal agreement. Usually, things like products, property, protection, or services are offered for the exchange of money. 

 

If not trading in money at all, the parties should be sure that the court would view whatever they are trading, also called their consideration, as valuable. 

Capacity

 Each party must be fully able or have the legal capacity to enter into the contract in order for it to be considered valid. For instance, you cannot enter into a legal contract with a three-year-old. Both parties must be of their right mind in order to form a contract, so a valid agreement could not take place if one of the parties is under the influence of any mind-altering substance. This also includes the desire of both parties to enter into the agreement free from coercion. 

Legality

Contracts cannot be created to govern the trade of illegal products or services. A drug dealer cannot enforce a contract with their buyer if their buyer doesn't pay them. 

 Each party must show legal intent, meaning that they intend for the results of their agreement to be completely legal.