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Archive for the ‘Contracts’ Category

How to be released from a contract.

Sunday, September 21st, 2008

A contract is simply an agreement between parties, which be made orally or in writing, establishing and delineating an obligation of the parties. There are a number of legal remedies allowing participants to set aside a contractual obligation. A contract may be unenforceable or it may be voided or rescinded, by agreement of the parties.

A contract may be voided due to misrepresentation on the part of one or more of the parties involved. That is, if the contract was based upon false information or misrepresentation of a material fact by any of the parties (known as fraud in inducement) or if one or more parties unknowingly entered into the contract (known as fraud in factum). In either case, the contract could be rescinded. Also, depending upon the type of misrepresentation, damages may be awarded.

Another reason for setting aside a contract is when a mistake is made by one or more of the parties. This means that the parties may have an incorrect understanding regarding the obligations of the contract. There are several types of mistakes that can be made under the law, including unilateral, mutual and common. Common mistakes occur when both parties have misunderstood the facts of the contract. In that case, the contract can be voided if the mistaken belief fundamentally renders it impossible for the contract to be enforced. A mutual mistake occurs when there is a mutual misunderstanding of the terms of the contract. Each party to the contract may believe the terms of the contract are different. A contract under these terms may not be voidable if acceptable terms can be established. When only one party holds a mistaken belief regarding the contract, it is considered a unilateral mistake. In such case, the contract can generally only be voided if it is determined that a non-mistaken party was aware that the other party had a mistaken belief and was attempting to take advantage of that fact.

Duress or under influence can also create a situation where a contract may be voided. The party who wants to set aside the contract must prove that a threat was made and that the threat was why they entered into the contract. The other party must then attempt to prove that the threat in no way caused the other party to enter into the contract. An equitable doctrine of undue influence is when one person has taken advantage of their power over another person. This can exist in a familial relationship, such as parent and child, or attorney and client. The court has discretion over such a situation and can determine if a special relationship does indeed exist.

One other reason why a contract may be vitiated is in a case where one or more parties lack the capacity under law to enter into a contract, either due to mental incapacitation, disability, drunkenness or age. This can also happen when an agent for a company or individual may not have the power to enter into such a contract.

A contract based on an illegality, such as the desire to cover a crime, would be unenforceable, as would employment contracts obligating someone to work for less than minimum wage or forfeiting other rights, such as workers compensation benefits.

Confidentiality Agreement

Thursday, June 5th, 2008

While many of us have heard of, and even signed, confidentiality or non disclosure agreements in the past, many of us don’t understand the full impact of these contracts. Some companies choose to use stand alone confidentiality agreements while others have them smartly inserted into other types of agreements. Let’s take a look at this very common and important type of contract.

There are two main types of confidentiality agreements: ones between two companies or a company and an individual that have come to an agreement and want to protect their interests and ones between companies and employees. The point of the confidentiality agreement is the same, no matter which kind you find yourself signing: a company has a trade secret or a private piece of information that they want to keep private. When you sign a confidentially agreement, you are agreeing to remain silent on a particular issue. The penalty for violating a confidentiality agreement can be quite stiff and can result in heavy fines and even jail time so you should never take a confidentially agreement that you’ve signed casually.

Perhaps the best known type of confidentiality agreement that is signed is between a company and another company or between a company and an individual to help protect a trade secret or even a national security issue. It could be that in the course of a partnership between a company and a second party, a trade secret, or part of a trade secret was revealed and everyone who came into contact with that information was required to sign a form saying that they can’t reveal what they learned by penalty of law.

A similar agreement is often signed by new employees at various companies. These types of agreements have even filtered down to low wage employees who are able to access specially designed computer systems that may benefit that companies’ competition if it were ever leaked. In this case, a confidentiality agreement is often slipped into the job application that you will fill out and sign to get hired. Sometimes, the agreement is signed separately on your first day of work with several other forms. Many companies try to keep these types of agreements to a minimum since it is difficult to stop the flow of information when it is being disseminated to so many people.

There are other types of confidentiality agreements, too. Often times, if you take part in a court case, you are not legally allowed to talk about what went on in court for any reason. In some court cases, you will actually be asked to sign a confidentiality agreement, while in other cases, an oral contract is made with the judge presiding over the case.

You probably don’t even realize it, but you have likely signed several confidentiality agreements over the years, and although most of them are never pursued legally, it is always a good idea to keep in mind what you’ve signed off on because the penalty for violating a confidentiality agreement is extremely tough.

Basics of Contracts

Thursday, June 5th, 2008

Every year, millions of contracts are signed from coast to coast for everything from homes, cars and business dealings, to just name a few, but how many of us really understand what a contract is and what legal responsibilities are part of signing and being part of a contract. Let’s take a closer look at how the average contract works and what they mean for you and me.

A contract is a legally binding volume of agreements or promises that is enforceable by local, state or federal law. If a contract is broken, or breeched, there are legal remedies at hand to resolve the situation. If a contract is missing any of these qualities, it isn’t considered to be a traditional contract. A percentage of contracts are made with pen and paper, like when you buy a new car or when you buy a home. However, the overwhelming majority of contracts are oral, meaning they are spoken agreements between two people. If you buy a hamburger from your local fast food restaurant, you have an oral contract that you will pay this set amount for food that is of a certain quality and of a certain specification. If the food fails to meet that, you can get a refund of your money or new food. Most people don’t consider these types of arrangements contracts, but they are.

Most written contracts can be broken down into the same basic sections. The first section is almost always where the parties involved in the contract identify themselves and define who they are, where they live and what their roles are from here on in. From there, most contracts then define the situation (selling/buying a car, home or whatever other financial agreement is taking place). The final part of the contract is usually where the specifics are hammered out and any point by point details that set this particular contract apart from similar ones is detailed. Both parties sign and date at the end and the contract is complete.

Even though most of us enter into far more oral contracts on a daily basis than written ones, it is always a good idea to get any high dollar oral contract down on paper to ensure that everyone’s rights are protected and that no one tries to renege on the contract at a later date.

Contracts can be illegal if they purport an illegal activity or an illegal exchange of goods or services. Some contracts can be undone because of one illegal clause or section in an otherwise legal contract. Even a single type can render an otherwise expertly written contract null and void, so it is always a smart move to enlist the help of a lawyer or other contract expert if you need one drawn up.

There are a host of legal remedies available for those that are suffering from breech of contract, such as suing to receive damages and to have the contract enforced. Check with a lawyer to see what legal options you have if you feel that a party has backed out of a legally binding contract.

Employee Agreement

Thursday, June 5th, 2008

An employee agreement, or as it is better known, an employee contract, is a simple legal document drawn up by an employer for an employee to sign. It outlines everything from the terms of the work environment, the length of the employment, the financial terms of the agreement and is usually contains a clause or two about privacy or confidentiality. Many people don’t realize that they sign an employee agreement when they start their job, but it is almost always part of the initial job application or part of a form you sign once you’ve been hired. Corporations use standard employee agreements for low wage earning employees but may need to create individual agreements for high ranking officials who have unique job descriptions and access to company secrets. The longest employee agreements are usually for unique positions that garner huge wages, such as a professional athlete or a president of a major corporation.

The point of an employee agreement is to protect the hiring company in case the employee attempts to seek some kind of legal assistance during or after their time of employment. An employee agreement will almost always outline the terms under which the employee can be fired or terminated and what the obligations are by both parties should that happen. It is often this part of the employee agreement that is debated in court cases for wrongful termination or if someone feels they weren’t given the severance package they were promised in their contract.

Sometimes, even extensive employment agreement contracts are made from templates, but it is uncommon. Sports leagues have set employment agreements in place for “rookie” players that can’t be changed under the collective bargaining agreement in place in that particular sport.

Other essential parts of an employee agreement include a complete outline of the benefits offered, if any, by the employer, how long they last for, and all the essential details regarding how they work. There is often a clause about reimbursement of expenses during the length of employment. Again, this wouldn’t apply as much to low level employees, but would to high ranking officials that require a travel allowance. There can even be a miscellaneous section at the end of the agreement that goes over any and all provisions that couldn’t be fit into the contract anywhere else. They can include an outline of local, state or federal laws that pertain to the employment contract and termination by the employee details.

Overall, the average employee agreement only covers two to three pages, maximum. Even template based corporate employment agreements that masquerade as employment applications seldom run over two pages, although the fine print is particularly fine. A more complex employment agreement can run dozens or even hundreds of pages if the work is sensitive enough and the employer feels that they need to spell out every minute detail to protect their interests.

While you may not even realize it, almost everyone working today is working under an employment agreement of some kind.

License Agreement

Thursday, June 5th, 2008

A license agreement is one of the most common and straight forward types of contracts out there. It essentially gives license, or permission, for someone to use something created by another person. Examples of a license agreement would include a character from one television show showing up on another show or a product, such as Febreeze, being used and marketed as part of another product. License agreements tend to be simple at the onset but can become quite bogged down in legal mumbo jumbo if a company is concerned that the license agreement is going to be abused or misused in a way that could harm the original license holder.

One of the most popular uses of a license agreement is to protect intellectual property. The license agreement is necessary to prevent possible legal action by the inventors of the intellectual property that is being used. For example, say Microsoft invents a particular piece of computer software that is then included in a larger suite of software released by another company. That company would need a license agreement to release and make money off of the original software developed by Microsoft. Not only would the license agreement give permission to that company to release and profit off of Microsoft’s invention, but it would also outline how Microsoft would get paid, for how long and for how much.

Another example in which a license agreement is often used is with the sale of personal computers. When a personal computer is sold, it often contains dozens of software programs already installed on it, and not all of them are from the same manufacturer. That means that the company that is selling the computer needs a separate license agreement with every company who has software preinstalled on that particular computer. All of this is outlined in the end user agreement that comes with personal computers. Some companies don’t allow hard copies of their software to be included with the shipment of a new computer, instead, they only allow the one copy that is installed to exist and that’s it. This is mostly done because they fear that pirated copies will be made and they will lose revenue.

License agreements are also used if a company wants to use another company’s trademark. Sometimes companies will enter into advertising agreements, such as when McDonalds advertises the latest Hollywood hit film, they will use that film’s trademark in their own advertising. When this happens, you will need a license agreement that covers trademark use. The agreement would have to cover how long McDonalds would be able to use the trademark and for what type of advertising. Again, the basic agreement is actually quite short but when it is padded out with extensive rules and regulations, a license agreement can become quite lengthy.

As you can see, a license agreement is a vitally important form of contract that can help companies share everything from products to images to trademarks safely.

Non-disclosure Agreement

Thursday, June 5th, 2008

One of the most popular types of contracts and one of the most commonly used when two corporations or companies are exchanging sensitive information is a non-disclosure agreement. Known mainly outside of the United States and Canada as a confidentiality agreement, the non disclosure agreement is considered a common type of contract when two corporations or when a corporation and an individual are exchanging sensitive or valuable information, such as secret ingredients or recipes to a popular product, or any other information that a company believes will damage them if it were to become public. These agreements usually aren’t very long and are quite straight forward. Some non disclosure agreements can last just a few weeks, much like a media blackout on a trial, or they can last weeks or even years. Some non disclosure agreements can even last in perpetuity, so that the details of the contract or arrangement can never be talked about or the agreement becomes null and void.

Another popular use for non disclosure agreements is among companies and employees. This can even extend down to companies and minimum wage employees who will come into contact with computer systems or business techniques that the company feels would benefit their competition. For example, for many years, Viacom’s Blockbuster Video made all new employees sign a non disclosure agreement as well as an agreement that forbade employees from working at any other video store or chain for a period of time after their employment at Blockbuster was ended. It was thought that certain aspects of working at Blockbuster could be shared and disseminated to their competition and that dissemination would cause harm. Similar agreements are signed all the time, especially if you are a high ranking employee of a company and you have access to trade secrets or other sensitive materials.

Some companies even go as far as stating that the existence of a non disclosure agreement can’t be disclosed. The idea is that once a NDA is admitted to, than both parties involved are admitted that they have something to hide.

Most NDAs contain the same basic sections as they usually aren’t long or complicated contracts. First, both parties involved in the agreement are defined and basic information on both sides is given. Next, the NDA will define what can’t be talked about and what the essential point of the contract is. Some complicated NDAs will even define each and every term that can and can’t be used by the parties involved. Some NDAs can be extremely detailed and particular, but this isn’t what many people would consider to be an “average” NDA. Next, the NDA will spell out what can be talked about and what is considered fair game. A period of time in which the NDA is in effect is often spelled out next. Finally, the NDA will spell out the ramifications of what can or will happen if the contract is violated.

As you can see, the average non disclosure agreement is pretty straight forward and is used to help protect industry secrets from becoming public knowledge.

Oral Contracts

Thursday, June 5th, 2008

One of the most misunderstood and confusing forms of contract today is the oral contract. The old saying that “an oral contract is worth the paper it is written on” is still true to some extent, but there are historical presidents of oral contacts being enforced, even when they result in millions of dollars changing hands. However, this is the exception, not the rule, so if you have a chance to get something in writing, do it. An oral contract only invites trouble.

For obvious reasons, an oral contract is extremely difficult to prove in court since there is no real “proof” of the verbal agreement being made. It is essentially your word against someone else’s. Most people who use oral contracts do so because they are entering into a contact with someone they know and trust; someone who they believe they don’t need a stuffy, overly formal written contract with, but as anyone who has any experience in money matters can tell you, friendships dissolve and partnerships disappear when large sums of money are involved. In an overwhelming number of cases, oral contacts are tossed out of court due to lack of evidence, but that isn’t always the case.

In a famed court case from 1984 known as Penzoil vs. Texaco, industry giant Getty Oil was sold via a handshake deal and oral contact to Penzoil, only to have Getty renege on the deal when a larger, formal offer was given by Texaco. The judge in the case sided with Penzoil and the deal was consummated thanks to the oral contract.

So, this begs the question, will your oral contact be honored or will it be tossed out? The safest answer is to not ever find out and to use a written contact whenever you can.

If you do find yourself going to court to try to enforce an oral contact, you should bring any and all evidence that you have with you, even if it is nothing more than some scribbles on a cocktail napkin that you made with the other party in the process of negotiating your oral contact. The judge understands that these written details do not constitute a contact on their own, but if you can show a process that was begun and followed through, you will have a much better chance of having your oral contact enforced than if you show up empty handed and simply accuse someone of agreeing to an oral contact.

Case law also points to the fact that you may not have much time to enforce your oral contract compared to the time you would with a written contract, so if you feel that you need to pursue legal action to have your oral contact enforced, it is better to act quickly.

The world of oral contracts is a bit complicated and can be downright confusing, so if at all possible, avoid using them in favor of traditional, written contracts that are much easier to enforce.

Service Contract

Thursday, June 5th, 2008

A service contract is one of the least complicated and most common types of contracts in the world. It is simply an agreement between two parties for a job or service to be performed. You can find service contracts between an employer and a freelance employee (everything from a journalist to a company that performs landscaping) or between a movie studio and a movie star, although exclusive service contracts tend to be a relic of the past.

Most service contracts are painfully simple, but just like most contracts, it can be significantly more complicated if the contract is for a large amount of money or if one of the two parties feels a need to protect itself from a possible violation of said contract. The most basic service contract simply outlines both parties involved with full names and addresses, defines the service being performed, defines the dates in which the service is to be performed by, outlines the financial obligation of the payee, the location of the service and that’s it. Both parties sign and you have yourself a legally binding service contract. Of course, most service contracts aren’t quite that simple. Let’s look at some other provisions you might find in the typical service contract.

Many service contracts will have an expanded section that defines the service being offered so that there is little to no legal wrangling when it comes to the job in question. Just like in most contracts, it tends to be these types of lengthy clarifications that pads what would be an otherwise basic contract into an encyclopedic one. If the contract is for a significantly large amount of money and there are investors or third party groups that are funding the contract, they are often spelled out clearly in the details of the contract to help deflect any financial obligation from the main party. Almost all service contracts now come with a basic paragraph discussing privacy or confidentiality if the service in question requires exposure to trade secrets or to any sensitive information that can’t be disseminated to the public at large. There can also be a paragraph outlining any sort of publicity or marketing of this project. If the project is to be kept secret, publicity or advertising would be banned, or there could be an agreement that allows one type of advertising while others could be banned.

In most service agreement contracts, there is a section outlining legal responsibility in case of an accident or death while the agreement is being executed. This is often one of the longer and more complicated parts of the contract and the one part that is often protested in court. Even basic accidents like a slip and fall or a similar situation is often highlighted here and the party drawing up the contract will often purport that they carry no fault if any accident occurs. It is often up to a judge to decide if the contract covers the particular incident that ends up occurring.