The why, what and how of contracts

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THE WHAT, WHY AND HOW OF CONTRACTS D. Scott Berry www.berrylawoffices.com facebook/berrylawofficesmn

www.berrylawoffices.com Definition of a Contract “ An agreement between two or more persons which creates an obligation to do or not to do a particular thing.” Black’s Law Dictionary , Sixth Edition (1991)

Are all contracts required to be in writing to be legally binding? NO! www.berrylawoffices.com

[object Object],[object Object],[object Object],[object Object],Contracts that usually have to be in writing to be enforceable www.berrylawoffices.com

www.berrylawoffices.com Elements of a Contract: ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Object of a contract: ,[object Object],[object Object],[object Object],www.berrylawoffices.com

www.berrylawoffices.com ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Decision: “ Business transactions, in violation of law, cannot be made the foundation of a valid contract; and the general rule is that where a statute makes a particular business unlawful generally, or for unlicensed persons, any contract made in such business by one not authorized is void.” The result is that Buckley was not compensated for his services.

Capacity of the Parties to Contract ,[object Object],[object Object],[object Object],www.berrylawoffices.com

The Parties. . . www.berrylawoffices.com

Who is the contract between? Individuals Corporation www.berrylawoffices.com

www.berrylawoffices.com IF YOU ARE SIGNING THE CONTRACT ON BEHALF OF A CORPORATION ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

www.berrylawoffices.com IF YOU ARE SIGNING THE CONTRACT ON BEHALF OF A CORPORATION ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

www.berrylawoffices.com IF YOU ARE SIGNING THE CONTRACT ON BEHALF OF A CORPORATION ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

www.berrylawoffices.com IF YOU ARE SIGNING THE CONTRACT ON BEHALF OF A CORPORATION AVOID SIGNING THE CONTRACT AS AN INDIVIDUAL!

www.berrylawoffices.com Offer & Acceptance ,[object Object],[object Object],[object Object],[object Object],[object Object]

www.berrylawoffices.com Offer & Acceptance ,[object Object],[object Object],[object Object],[object Object]

www.berrylawoffices.com Offer & Acceptance Carlill v. Carbolic Smoke Ball Company ,[object Object],[object Object]

www.berrylawoffices.com Offer & Acceptance Carlill v. Carbolic Smoke Ball Company ,[object Object],[object Object],[object Object]

www.berrylawoffices.com Offer & Acceptance Carlill v. Carbolic Smoke Ball Company Was it an offer?

www.berrylawoffices.com Offer & Acceptance Carlill v. Carbolic Smoke Ball Company It was an offer! ,[object Object],[object Object],[object Object]

www.berrylawoffices.com Offer & Acceptance Carlill v. Carbolic Smoke Ball Company ,[object Object],[object Object],[object Object],[object Object]

www.berrylawoffices.com Offer & Acceptance Carlill v. Carbolic Smoke Ball Company Was the offer accepted by Mrs. Carlill’s actions?

www.berrylawoffices.com Offer & Acceptance Carlill v. Carbolic Smoke Ball Company Yes, she accepted the offer The court determined that satisfying conditions provided in the advertisement for using the smokeball constituted acceptance of the offer.

www.berrylawoffices.com Offer & Acceptance Felthouse v. Bindley ,[object Object],[object Object],[object Object],[object Object],[object Object]

www.berrylawoffices.com Offer & Acceptance Felthouse v. Bindley Was there a contract? No , the court determined that an acceptance of an offer will not give rise to a binding agreement unless it is expressly communicated to the offeree.

www.berrylawoffices.com Offer & Acceptance Beard Implement Co v. Krusa ,[object Object],[object Object],[object Object]

www.berrylawoffices.com Offer & Acceptance Beard Implement Co v. Krusa ,[object Object],[object Object],[object Object],[object Object]

www.berrylawoffices.com Offer & Acceptance Beard Implement Co v. Krusa ,[object Object],[object Object],[object Object],[object Object],[object Object]

www.berrylawoffices.com Offer & Acceptance Beard Implement Co v. Krusa ,[object Object],[object Object],[object Object],[object Object],[object Object],WHAT DID THE COURT DECIDE?

www.berrylawoffices.com Offer & Acceptance Beard Implement Co v. Krusa WHAT DID THE COURT DECIDE? ,[object Object],[object Object],[object Object]

www.berrylawoffices.com Offer & Acceptance Beard Implement Co v. Krusa WHAT DID THE COURT DECIDE? ,[object Object],[object Object],[object Object],[object Object]

www.berrylawoffices.com Contract Consideration What is consideration and is it necessary? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

www.berrylawoffices.com Contract Consideration Carlill v. Carbolic Smoke Ball Company Was there consideration? Yes, the court determined that purchasing or using the smokeball constituted consideration. There was no benefit to the company for the customer relying on the procedures provided in the advertisement.

Contract Consideration ,[object Object],[object Object],[object Object],[object Object],[object Object],Really what is consideration? www.berrylawoffices.com

Contract Consideration ,[object Object],[object Object],[object Object],Was there adequate consideration for opening the envelope? www.berrylawoffices.com

www.berrylawoffices.com Contract Consideration Consideration when contracts are amended (Case study) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

www.berrylawoffices.com Contract Consideration Consideration when contracts are amended (Case study) ,[object Object],[object Object],[object Object],[object Object],[object Object]

www.berrylawoffices.com Contract Consideration Consideration when contracts are amended (Case study) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

www.berrylawoffices.com Contract Consideration What’s the result? Why? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

www.berrylawoffices.com Contract Consideration ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

www.berrylawoffices.com Contract Consideration 5. What did the court decide? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

The importance of well written agreements www.berrylawoffices.com

Why should an agreement be in writing? If it is not, the contract my not be enforced! www.berrylawoffices.com

Why should a contract be in writing? ,[object Object],[object Object],[object Object],[object Object],[object Object],www.berrylawoffices.com

What should be in a written contract? A clear description of all obligations between the parties. - Include a full and complete description of all the obligations of each party, including: ,[object Object],[object Object],www.berrylawoffices.com

What should be in a written contract? A description of the Payment Terms . ,[object Object],[object Object],[object Object],a) Cash? b) Check? c) Wire? d) Certified funds? ,[object Object],[object Object],- What happens if a payment is late? www.berrylawoffices.com

What should be in a written contract? A Description of a Duration of the Contract . ,[object Object],[object Object],- Is the contract complete upon delivery of the products and/or services? - Is the contract a 30 day, 6 month or one year contract? - Does the contract have to be renewed in writing? - How much notice is required to renew the contact? - Or does the contract automatically renew? www.berrylawoffices.com

What should be in a written contract? Termination of the Contract . ,[object Object],[object Object],[object Object],[object Object],www.berrylawoffices.com ,[object Object]

What should be in a written contract? Insurance Provisions . ,[object Object],- Are the risks equal for all parties? - What risks are associated with the performance of the contract? - Who is responsible for obtaining and paying for the insurance? www.berrylawoffices.com

What should be in a written contract? Governing Law Provisions . ,[object Object],- District court, arbitration or mediation? - What state and county is a dispute required to be brought? ,[object Object],[object Object],www.berrylawoffices.com

Arbitration or Litigation? Advantages to Arbitration : 1. Usually more expedient resolution. 2. Depending upon the amount of dispute, arbitration can be less costly. 3. Depending on the rules of arbitration, any evidence may be allowed. 4. Not a public hearing and there is no public record of the proceedings. 5. The arbitration process can be less adversarial than litigation which may help to maintain business relationships between the parties. 6. Arbitration is more informal than litigation. HOWEVER, ,[object Object],[object Object],[object Object],www.berrylawoffices.com

What should be in a written contract? Warranty and Guaranty Provisions . ,[object Object],[object Object],[object Object],- Price reduction? - Full refund? - Other described damages? www.berrylawoffices.com

What should be in a written contract? Other Provisions . ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],www.berrylawoffices.com

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The why, what and how of contracts

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