The Legal Zone

Contracts 101

June 24, 2021 Regina Campbell Season 1 Episode 1
The Legal Zone
Contracts 101
Show Notes Transcript

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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[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.