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What makes a contract? Should I sign one?

Corporate & Business Law

6 minute read

Welcome to CL basic law today we’re gonna talk about contracts. The first thing is what is a contract? It’; traditionally been referred to as a meeting of the minds. It’s when 2 parties or entities come to an agreement as to a transaction or how they're gonna behave amongst themselves that is the contract. That could be reduced to writing which we would call memorialization and the writing is a reflection of that meeting of the minds, now a contract can either be in writing or it could be orally. There are only a few contracts that have to be in writing. There’s a law called “the statute of frauds:” every state has an OF which means what contracts have to be in writing often it’s property the sale or rental of real property leasing of RP guaranteeing a loan for someone else things like that. Very limited matters./ mostly everything else can be oral or in writing. In an oral agreement you just come to prove up the operating agreement people testify as to what diff people had said and agreed to and looking at how the parties perform that’s an incredibly important element- how did the parties perform under what is being argued to be the contract that can be evidence of the existence of the terms of the contract. With regards to writing you don't have to have a single writing you can have multiple writings when combined they make up the contract. You might have emails going back and forth when you take those emails as a whole they can constitute the totality of the contract. There are certain terms that are required for a contract. You need to know who the parties are and you need to know what you're giving up and what you receive in the contract. What I mean by giving up or receiving, what goods and services are being provided and what monies are being paid when the monies are to be paid/services or goods are to be provided. When the contracts begin and end. And if you don't have an ending point on a contract many states will allow either party to terminate the contract at any point because the contract can't go on forever; it has to have an ending date. So if you don't have an agreed to ending date the courts will say either party at any point in time can go hey contract’s over and terminate. That’s very difficult when you're in a service situation halfway through giving the services and either side terminates that could be very problematic. Importance in drafting a contract is clarity and completeness. Describe what you are agreeing to and what are the circumstances around it because when you write this contract you're not writing for each other alone, you're also writing for the court. If there is a dispute a judge has to come in and interpret what the parties agreed to and in order to do so the courts gonna look at the writing if its in writing and read that and what people often do is they don't put in everything and go oh we know what we’re talking about we’ll just shorthand it we’ve got a clear mind. That’s useless to a judge. He wasn't there and he’s not in your mind. He doesn't know what you're thinking and very much could come out with the wrong decision because they don't have enough info. 2 the parties themselves forget what they agreed to over time they forget or forget out of convenience. I don't remember agreeing to it-well we talked about it-well it’s not in the contract. Or if you're dealing with a big company the person you negotiated the contract with leaves and someone else comes in and they don't know about the agreements and they will say the parties agreed to something entirely different. What is a breach of contract? A BOC is when one party fails to abide by a material term/ that’s not just a little term or a term it’s a material/cire term has to be breached if a core term is breached that gives rise to a BOC claim. What do you do when you have a BOC claim? you have to go to court, contracts do not enforce themselves. It’s like speeding on the highway. People don’t follow the speed limit because it’s the law. They follow it because there might be a police officer hiding up the road. They'll give them a ticket. It'll cost money. It's embarrassing standing on the side of the road and you’re getting written a ticket. And your insurance rates go up, you're delayed for your appointment, those reasons are why people don't speed not because it's the law. Same with a contract ppl don't necessarily follow the contract because it’s written down. They follow it because they are scared of the consequences so you always have to be prepared to go to court to enforce the contract. That's why you wanna be absolutely clear in your obligations so when you go to court the court knows what you're seeking to enforce and you have a better chance of enforcing it. What can you get from the court? Damages, someone’s to provide goods, and they didn't provide it, and you have to get the goods from somebody else/pay an extra price for those goods or the services were defective provided the cost of services or the goods and services were not paid for. The cost of goods and services or in some cases an injunction requiring not to do something as a result of a contractual term. Those are all some of the types of damages. Sometimes consequential damages. I entered a contract to build widgets and you knew that i was gonna put those widgets into a bigger machine i was gonna sell and i needed those widgets for that machine to sell that machine and you don't provide me those widgets now it’s not just the cost of making those widgets but it’s the delay in making those machines and selling those machines. There might be some consequential damages above and beyond the contract price that I also would be entitled to and other variations of damages that are available. Hope that was helpful thank you.

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