Contracts 101

On this episode of The Legal Zone, managing attorney Regina Campbell, of The Campbell Law Group, PA, introduces the basics of contracts and their importance for your business.

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Transcript

[00:00:05] Hi, good morning. I'm Regina Campbell and
[00:00:10] proud to bring the, legal zone to you from the Campbell law group. And, today this is,
[00:00:15] season one episode one, and we're going to be talking about contracts 1 0 1. So this
should be really
[00:00:20] exciting guys. it's going to. You know, brief primer on contracts and something that every business owner and
[00:00:25] person should know about contracts. So, you know, number one contracts should always be in writing.
[00:00:30] I know that may seem obvious, but you'll be surprised how often that, the contracts are not in
[00:00:35] writing or they'll piece together with texts. You know, he said this and so, and so said
[00:00:40] this, and then if you put it all together, this is, was our contract and it doesn't mean that's actually a less
[00:00:45] effective contract or, or not legally binding contract in most states oral contracts.
[00:00:50] Are, honored and basically recognized except for when it deals with land or lending money or
[00:00:55] something related to estates, which has to have certain formalities of execution. But for the
[00:01:00] most part contracts basically, you know, are an offer and acceptance of certain
[00:01:05] terms. So aside from number one, the contract should be in writing. Number two.
[00:01:10] Also the terms need to be very, very clear. so basically, if you guys talked, you know,
[00:01:15] if you're talking to a party or another business and you guys have agreed to certain terms, okay, I'll sell you
[00:01:20] a hundred widgets, for $10 a widget. Basically, those are one of the essential terms that need to
[00:01:25] be in the contract. And. that brings us to number two, which is basically essential
[00:01:30] terms, which might also not just include a price and, you know, you know, understanding of how
[00:01:35] many products you're purchasing or what services you're purchasing. It also should include, you know,
[00:01:40] information such as when the delivery is going to be. Who takes responsibility for
[00:01:45] delivery upon arrival? Is it, at a location at a dock? And in which case, the, you know,
[00:01:50] liability shifts to the other person to pick it up in time. What are the terms, as far as who pays
[00:01:55] for delivery, what happens in the events of refunds? So, these are some examples, depending
[00:02:00] on the type of contract that you have, may be essential terms.
[00:02:05] So step number one, basically you have, of course getting in and writing. That's very
[00:02:10] important. We just discussed that step. Number two is getting the essential contracts. I mean, essential
[00:02:15] terms in place. Most people think of the essential terms as you know, what you might have agreed to as
[00:02:20] far as, you know, the price of a good, and how many goods that you want. Those are normally
[00:02:25] considered essential, essential terms. but there may be other essential terms depending on the type of contract that you
[00:02:30] have. So for instance, you might indicate that you wanna buy a hundred widgets at $10 a widget,
[00:02:35] but some of the other essential terms may be when the payment is due, is payment
[00:02:40] due upon, is it 50, 50, 50% now, 50% upon delivery?
[00:02:45] Is it due next 30 days? Also, in some of the essential terms, maybe with goods and
[00:02:50] service goods contract basically might also be who's going to deliver the goods. When are they
[00:02:55] expected to be delivered? So, these are some examples that might also of other additional terms that
[00:03:00] may be necessary, in the event, you know, actually as part of an essential term that should be included in a
[00:03:05] contract contracts are really, they're basically bred from a
[00:03:10] necessity of what's going on in the deal. Those are examples of a, you know, basically as we indicated
[00:03:15] first in the first step, you know, number one, a contract should be in writing. Number two.
[00:03:20] Should be to ensure that you include the essential terms of a contract actually in
[00:03:25] writing. So some examples of essential terms might be, you know, what, what you're purchasing a
[00:03:30] hundred widgets and at what price are you purchasing the widgets, but specifically let's,
[00:03:35] let's give an example of maybe what might be other essential terms that you need to know, like in a goods
[00:03:40] contract, for instance might be, you know, when do you expect payment? Is it 50%
[00:03:45] now and 50% on upon delivery? Is it, basically net 30 days, are you going to
[00:03:50] be running basically on credit, something to consider, you know, and when you're making the arrangement to make sure
[00:03:55] you're understanding that if you're waiting for payment, and also particularly with the goods contract, you may
[00:04:00] want to make sure that you're actually talking about when delivery is expected. When are the products supposed to be
[00:04:05] delivered? So may seem basic, but you'll be surprised how many times contracts do not particularly
[00:04:10] goods. Contracts do not include these essential. now not including certain essential
[00:04:15] terms may not necessarily be fatal to enforcement of a contract. but it's not recommended. Let's put it that way.
[00:04:20] so basically, I mean, if a, if a court can tell more or less what you guys had intended in the
[00:04:25] basics, you know, offer and price or so to speak or terms, as far as the widgets and the
[00:04:30] price are there, sometimes the courts can fill in the gaps, but it's an extremely expensive process. So it's
[00:04:35] recommended that you're. That is then in the contract. So, it's clear what the party has had it basically
[00:04:40] intended. So, when you're dealing with service contracts, for instance, we know, give another examples of
[00:04:45] essential terms. You know, what services are included, what services are not included. You know, once
[00:04:50] again, when is payment expected, what is the expectation of the parties? And if there's anything
[00:04:55] specifically material or in which a party's relying on that should become an essential term,
[00:05:00] that's clearly defined in a. okay. number three, you may want to also consider of course,
[00:05:05] what state law, you know, applies as far as governing the contract. So
[00:05:10] depending on if you're dealing across state, a lot of us are dealing business on the internet. It's better to put a
[00:05:15] venue clause and potentially a personal jurisdiction clause in these contracts. Which you'll often
[00:05:20] see from a res you know, from a personal and a commercial point of view. You'll often see if Florida law
[00:05:25] applies. The parties agree to basically jurisdiction within the state of Florida and the
[00:05:30] event of a dispute. so, you know, these are things that are maybe be
[00:05:35] important, particularly depending on the type of, you know, contract that you're entering into some
[00:05:40] of these contracts. So for instance, real estate, you know, purchase of a real estate property, a lot of times
[00:05:45] they're going to be governed by the, the state in which, where the property's located, or specifically the county,
[00:05:50] which is located. So, some of that blends itself to not have such, such
[00:05:55] importance, but in other types of contracts, these can be important elements, basically. So, one of the
[00:06:00] other things is also consider now we don't always want to get into a contract and,
[00:06:05] and be thinking, well, what happens if it goes wrong? Obviously, we're all hoping when we get into a contract
[00:06:10] that it's going to go, right. But unfortunately, there is that side of the equation. That's a
[00:06:15] possibility, and it should be covered in a contract. What happens in the event that someone does not.
[00:06:20] what happened? You know, what are the remedies for basically a breach of a contract? you know,
[00:06:25] do you want to call something a material breach right off the bat? For instance, let's say if the goods
[00:06:30] are not delivered on by the 30th day, because maybe you have to turn around and sell to
[00:06:35] somebody else, and it might be an important element in which you need to make sure you have it. Time may be
[00:06:40] of the essence to you. So, you may want to say that it is the contract is potentially
[00:06:45] canceled or considered terminated. If it not delivered on the 30th. to give you an example from the original
[00:06:50] widgets sort of essential terms. So, I think you could probably see, you
[00:06:55] know, building a contract is like building a foundation it's and it basically just describes, you know,
[00:07:00] what it is that each one of you thought goes into this house or enter this project.
So, whether it's for bring our
[00:07:05] personal contract or personal use information or consumer goods, or for, you know, commercial,
[00:07:10] commercial reasons, you can kind of see how these different elements are very important.
[00:07:15] Also very important. And maybe the expectations of attorney fees. Unfortunately, once again, I noted, we don't
[00:07:20] always try to think about things when, in terms of they don't go well, but it is a
[00:07:25] reality. So, for instance, in the state of Florida, you're not entitled to attorney fees. If someone breaches a
[00:07:30] contract, you're not entitled to attorney fees unless it's statutorily permitted
[00:07:35] or it's in a contract. So, someone can breach a contract that might have a value of
[00:07:40] let's say for instance, $30,000. And you have to take 'em to court to enforce the
[00:07:45] contract. Unfortunately, if there's no attorney fees provision, you might spend 10 or $15,000
[00:07:50] enforcing the contract to be able to get your 30 back. And again, that's assuming that the person
[00:07:55] is, you know, you can actually execute on your judgment. You win. You can execute on your judgment
[00:08:00] and you can actually get the funds back. So, it's often important element.
[00:08:05] I find one of the most important ones to have an attorney fees provision that requires, you know, the
[00:08:10] event, this contract has to be enforced, or there's some subject, some issues with interpretation or anything
[00:08:15] of that nature that the prevailing party be entitled to attorney. so, and
[00:08:20] again, you know, each one of these elements can go, we can go further into, into depth with each one of them, but I'm just giving
[00:08:25] you an overview of the type of provisions that should be in a contract. And why, and the basic elements at that minimum,
[00:08:30] of course, we also want to talk about, you know, you know, who's signing this contract
[00:08:35] basically. Making sure that the parties signing it are actually have authority to
[00:08:40] bind that company or that person have authority to act on behalf of that person that's entering
[00:08:45] into illegally binding contract for whether it's services or goods.
[00:08:50] So also you want to take into consideration if you're doing any international transactions, that can be rather
[00:08:55] tricky. You may want to use letter of credits, other types of forms to ensure payment. In
[00:09:00] addition to. In enforceability, what type of laws you choose? what
[00:09:05] type of law, you know, is that country's law, for instance, depending on where the goods are coming from or the
[00:09:10] services are occurring, or is that country going to honor the contract? What are these rules? These are different types of things you
[00:09:15] want to think about this actually also even applies in a family setting. If, some of us don't think
[00:09:20] about it in that manner, but even family contracts, such as PRS or post ups,
[00:09:25] marital settlement agreements are all subject to the contract. All subject to contract law, which
[00:09:30] for the most part, just to understand a little bit, most courts are required to enforce a
[00:09:35] contract based on the four corners of what they call the four corners of the agreement. So
[00:09:40] unless the agreement is, ambiguous in some manner, or one of the provisions are, ambiguous,
[00:09:45] the court is not allowed to go outside the contract to actually look and see what
[00:09:50] the parties may have agreed or not agreed to. If it's unambiguous, they're required to stay within the
[00:09:55] four corners. so once again, this is another example is why you need to make
[00:10:00] sure that the elements, the essential elements in terms are in your contract. They're spelled out
[00:10:05] clear. I guess one of the other terms I would say for number four would be make sure your contract is clear and concise
[00:10:10] as, as it can be. You know, we, of course, you know, you know yeah. You know,
[00:10:15] hindsight, you know, 2020 is, you know, you know, the past is you see sort of in hindsight, you see things more
[00:10:20] clearly, then you do a lot of times when you're doing the contract at the. , but it's very important to make
[00:10:25] sure you understand what you're writing and that it's clear. And often in
[00:10:30] contracts, I will use examples. for instance, if we're doing an equation to figure out a termination
[00:10:35] provision or how to figure out a pricing, that might be a little bit more complicated than just a, a per price
[00:10:40] unit. I might give an example, you know, so for instance, in the event, this occurs,
[00:10:45] this is how the parties intend for this to be interpreted. And I give an example. Okay.
[00:10:50] So these are little tips just to help you out that actually avoid potentially, your contract
[00:10:55] or what you might have agreed to not being enacted or enforced in, in the way that you guys’ sort of bargained.
[00:11:00] And it's very important because if it's not clear, the contract doesn't have everything that you need.
[00:11:05] A lot of times you're going to end up with a circumstance that you did not count on, or unfortunately, in some cases, a lot of
[00:11:10] people can take advantage. so, you know, so for instance, in the example that I was giving you about an
[00:11:15] ambiguous term, if there's an ambiguous term, potentially the courts can go outside the
[00:11:20] four corners and use what they call parole evidence to be able to review maybe party's
[00:11:25] emails that were not, you know, that contain additional terms or context in which they're not sort of
[00:11:30] contained in the agreement. Right. But this is actually not permitted in the event that you, have
[00:11:35] an unambiguous term, even if it. Unintentional you didn't mean to actually
[00:11:40] sort, not clarify that or, or fix that provision in the agreement. Most of the time, the agreement's going to be
[00:11:45] upheld in the way that it's written expressed that are written as the courts would say. So here's a couple
[00:11:50] examples, just a couple tips when you're thinking of contracts, whether you're writing them or reading them. I know we're
[00:11:55] all stuck, we've all been in both positions, so to speak. So hopefully this is helpful. And of course, maybe
[00:12:00] we'll in another subsequent series. We'll drill down a little bit more into, for instance, merger,
[00:12:05] clauses, you know, other terms for, for instance, that go with manufacturing, distribution
[00:12:10] agreements and talk about essential terms that exist in those contracts and other types of contracts. But this is a
[00:12:15] little primer, hopefully it's helpful. And we want to thank everyone for joining us on our first, you know, season
[00:12:20] one episode, one of the legal zone with the Regina, with Regina Campbell brought to you by the Campbell law group.
[00:12:25] We hope you enjoy this, and we hope to bring you better content and not better, but more content in the
[00:12:30] future that might be helpful for you. Thank you for joining us for our first, for our first podcast, season one
[00:12:35] episode, one of contracts, 1 0 1. We hope you enjoyed it. We would like you [00:12:40] to subscribe to YouTube and follow us on all our social media accounts. And we look forward to seeing you our next podcast. Thank you so much.
[00:12:50]