The most basic principal of contract interpretation is that a contract is interpreted objectively and not subjectively. This idea originated at Harvard Law School, but still holds true in Texas today.
The formal view of contract interpretation ignores what the contracting parties thought the bargain to be and instead asks what a reasonable third party would interpret the words of the contract to mean. This approach is reflected in the following quotation from Federal District Judge Learned Hand:
A contract has, strictly speaking, nothing to do with the personal or individual intent of the parties. A contract is an obligation attached by the mere force of law to certain act of the parties, usually words, which ordinarily accompany and represent a known intent.
A contract requires a meeting of the minds. A determination of whether there was a meeting of the minds is based on objective standards of what the parties said and did, not on their alleged subjective states of mind. In re Hudgins, 188 BR. 938, 942 (E.D. Tex. Bankr. 1995), cited in Spectrum Creations L.P. v. Carolyn Kinder Int’l LLC, 2008 WL 416246, *45 (W.D. Tex. 2008).
An integrated agreement may be either fully integrated or only partially integrated. A fully integrated contracted is a final and complete expression of all terms agreed upon between or among the parties. A partially integrated contract is a final and complete expression of the terms regarding an agreement, but not a final and complete expression of all terms agreed upon between the parties. Some of the terms agreed upon are not contained in the written agreement.
Under the Parole Evidence Rule, if the parties have integrated their agreement into a single written contract, all prior negotiations and agreements with regard to the same subject matter are excluded from consideration, whether written or oral. Parole evidence is admissible to supplement or explain a partially integrated contract, but is not admissible to contradict it.
The primary duty of a court when considering the validity of a contract is to ascertain the intent of the parties from the contract as a whole, known as the “four corners rule,” not from isolated parts of the contract. This rule requires the court to look at the words of the contract, not prior drafts or exchanges of letters or other documents or testimony to determine the intent of the parties. To achieve this goal, the court must examine the entire document and consider each part with every other part so that the effect and meaning of one part on any other part may be determined. No one phrase, sentence or section of a contract should be isolated and considered apart from the other provisions.
Terms of a contract are given their plain, ordinary and general meaning unless the instrument shows that the parties used them in a technical or different sense. Words should be taken in their immediate context.
The expression of one thing is the exclusion of another. This is used to control, limit or restrain the otherwise implied effect of an instrument, and not to annex incidents to written contracts in matters with respect to which they are silent.
When words of a general nature are used in connection with the designation of particular objects or classes of persons or things, the meaning of the general words will be restricted to the particular designation. In some cases a list of consistent terms will include an overly-broad term that seems to reach beyond the scope of the other things listed. Ejusdem generis will limit an overly-broad term to be consistent with the list. However, the doctrine is not limited to lists. It can also apply to sentences in a paragraph.
When a contract is unambiguous, the court should apply the pertinent rules of construction, apply the plain meaning of the contract language, and enforce the contract as written.
It is a generally accepted rule of contracts that where several contracts are executed contemporaneously or at different times and pertain to the same transaction, they will be read together although they do not expressly refer to each other.
There are other general rules such as: Specific terms will prevail over general terms. Earlier terms will prevail over later terms, except in the instance of a Will. Handwritten terms will prevail over typed terms and typed terms will prevail over preprinted terms. Words prevail over number or symbols. Courts are required to follow elemental rules of grammar for a reasonable application of the legal rules of construction.
It is also a rule universally recognized that if an instrument admits of two constructions, one of which would make it valid and the other invalid, the former must prevail.
There is a presumption against illegality. When a contract by its terms, construed as a whole, is doubtful, or even susceptible of more than one reasonable construction, a court will adopt the construction which comports with legality. It is presumed that in constructing contracts the parties intend to observe and obey the law.
Finally, when agreements between parties are reduced to writing, the written instrument is presumed to embody their entire agreement, and the court should not read into the instrument additional provisions unless this is necessary to effectuate the intention of the parties as disclosed by the contract as a whole. Danciger Oil & Ref. Co. v. Powell, 154 S.W.2d 632, 635 (Tex. 1941).
Tuesday, December 8, 2009
Wednesday, November 4, 2009
Contracts in Texas
A contract is defined as a promise or set of promises with legal consequences. Normally, contractual promises are enforceable in a court of law. The law gives official recognition of the written contractual promises and offers remedies when the promises are not fulfilled.
The Supreme Court of Texas has noted that every contract includes an element of confidence and trust that the parties will faithfully perform their obligations. There is no duty of good faith and fair dealing unless the duty is created by express language in the contract or a special relationship of trust and confidence exists between the parties to the contract.
In Texas, the requirements for a valid written contract are: 1) an offer; 2) an acceptance in strict compliance with the terms of the offer; 3) a meeting of the minds (which is actually a subpart of the accepted elements, not an independent element; 4) each party’s consent to the terms; 5) consideration; and 6) execution and delivery of the contract with the intent that it be mutual and binding.
A basic element of the contract is the promise, which may be an express or implied promise made by one party for the purpose of assuring another person that a particular action or restraint from a particular action will occur. This is objectively determinable from the parties’ words or actions and not from either party’s subjective intentions.
Contracts may be unilateral or bilateral. A unilateral contract has only one promisor; the promisee makes no commitment. Mutuality of obligation is not essential for a unilateral contract to be formed. A unilateral contract is completed by the promisee’s performance of the act or acts called for by the promisor, not by the promisee’s making of any reciprocal promises. The promisor becomes bound to provide the promised benefit when the promisee delivers the bargained-for performance. There is no binding unilateral contract unless the promisee performs, or at least partly performs the acts requested by the promisor. Until such time, the promisor may revoke its offer. An option agreement is a common unilateral contract. An option agreement is a promise, or offer, by the optionor that the optionee may accept or reject. Until the option is exercised in accordance with the offer, the contract remains unilateral. The contract becomes binding when the option is properly exercised.
A bilateral contract is one in which there are mutual and/or bilateral promises made between the parties. If the parties have entered into a bilateral contract in which their promises are the only consideration for the agreement, their obligations must be mutual and binding for the contract to be valid. A common example of a bilateral contract is one in which one party promises to deliver goods to the other, and the other party promises to pay the specified purchase price.
There must be an offer, an acceptance and consideration for a contract to be recognized and enforceable. To prove a valid offer a party must show 1) the offeror intended to make an offer, 2) the terms of the offer were clear and definite, and 3) the offeror communicated the essential terms of the offer to the offeree.
The offer may dictate the manner, time and place of acceptance of the offer. Under such circumstances, an offer not accepted in a timely or proper manner lapses. When an offeree rejects an offer, the offer is terminated
An acceptance must be identical to the offer or there is no binding contract. Generally, an acceptance must not change or qualify the terms of the offer or the offer is rejected. When an offer prescribes the manner of acceptance, its terms must be followed in such manner of acceptance in order to create a contract. If an offeree fails to accept in the prescribed manner and attempts to accept in some other manner, a contract is formed only if the offeror waives strict compliance with provisions concerning the manner of acceptance.
An oral offer may be accepted by execution of a written instrument that embodies the terms of the agreement. Further, a written offer may, in some circumstances, be accepted orally. Acceptance may also be shown by conduct.
An acceptance is valid only if made before an offer is revoked or lapsed. An acceptance takes effect and creates a contract when it is communicated to the offeror. Acceptance is not effective when some abstract conduct other than communication to the offeror occurs. The accepting party may change his or her mind until the act of acceptance is actually communicated to the offeror.
Although an acceptance is effective only when communicated to the offeror, when an offer may be validly accepted by mail, the “mailbox” rule provides that the communication has been made and the contract is binding when the offeree deposits a properly addressed letter of acceptance in the mail, regardless of whether it is actually received by the offerror.
Mutual assent is often described as a “meeting of the minds.” Evidence of mutual assent in written contracts generally consists of the parties’ signing the contract and delivery of the contract with the intent to bind. To determine whether a meeting of the minds existed, a court reviews what the parties actually said and did. The parties’ failure to agree on a material term precludes a meeting of the minds necessary for a valid contract.
In some cases, what appears to be a valid offer and acceptance results in only a voidable contract because one party’s consent was, in fact, procured by fraud, undue influence, duress, or mistake.
Under Texas law, a party must protect personal interests by reading a contract before signing it. Absent fraud, the person is not excused from the consequences of failing to meet this obligation. If a person signs a contract without knowledge of its contents, they are presumed to have consented to the terms of the contract. Claims of belief that provisions differed from those plainly set out in the written contract are not generally admissible.
The Supreme Court of Texas has noted that every contract includes an element of confidence and trust that the parties will faithfully perform their obligations. There is no duty of good faith and fair dealing unless the duty is created by express language in the contract or a special relationship of trust and confidence exists between the parties to the contract.
In Texas, the requirements for a valid written contract are: 1) an offer; 2) an acceptance in strict compliance with the terms of the offer; 3) a meeting of the minds (which is actually a subpart of the accepted elements, not an independent element; 4) each party’s consent to the terms; 5) consideration; and 6) execution and delivery of the contract with the intent that it be mutual and binding.
A basic element of the contract is the promise, which may be an express or implied promise made by one party for the purpose of assuring another person that a particular action or restraint from a particular action will occur. This is objectively determinable from the parties’ words or actions and not from either party’s subjective intentions.
Contracts may be unilateral or bilateral. A unilateral contract has only one promisor; the promisee makes no commitment. Mutuality of obligation is not essential for a unilateral contract to be formed. A unilateral contract is completed by the promisee’s performance of the act or acts called for by the promisor, not by the promisee’s making of any reciprocal promises. The promisor becomes bound to provide the promised benefit when the promisee delivers the bargained-for performance. There is no binding unilateral contract unless the promisee performs, or at least partly performs the acts requested by the promisor. Until such time, the promisor may revoke its offer. An option agreement is a common unilateral contract. An option agreement is a promise, or offer, by the optionor that the optionee may accept or reject. Until the option is exercised in accordance with the offer, the contract remains unilateral. The contract becomes binding when the option is properly exercised.
A bilateral contract is one in which there are mutual and/or bilateral promises made between the parties. If the parties have entered into a bilateral contract in which their promises are the only consideration for the agreement, their obligations must be mutual and binding for the contract to be valid. A common example of a bilateral contract is one in which one party promises to deliver goods to the other, and the other party promises to pay the specified purchase price.
There must be an offer, an acceptance and consideration for a contract to be recognized and enforceable. To prove a valid offer a party must show 1) the offeror intended to make an offer, 2) the terms of the offer were clear and definite, and 3) the offeror communicated the essential terms of the offer to the offeree.
The offer may dictate the manner, time and place of acceptance of the offer. Under such circumstances, an offer not accepted in a timely or proper manner lapses. When an offeree rejects an offer, the offer is terminated
An acceptance must be identical to the offer or there is no binding contract. Generally, an acceptance must not change or qualify the terms of the offer or the offer is rejected. When an offer prescribes the manner of acceptance, its terms must be followed in such manner of acceptance in order to create a contract. If an offeree fails to accept in the prescribed manner and attempts to accept in some other manner, a contract is formed only if the offeror waives strict compliance with provisions concerning the manner of acceptance.
An oral offer may be accepted by execution of a written instrument that embodies the terms of the agreement. Further, a written offer may, in some circumstances, be accepted orally. Acceptance may also be shown by conduct.
An acceptance is valid only if made before an offer is revoked or lapsed. An acceptance takes effect and creates a contract when it is communicated to the offeror. Acceptance is not effective when some abstract conduct other than communication to the offeror occurs. The accepting party may change his or her mind until the act of acceptance is actually communicated to the offeror.
Although an acceptance is effective only when communicated to the offeror, when an offer may be validly accepted by mail, the “mailbox” rule provides that the communication has been made and the contract is binding when the offeree deposits a properly addressed letter of acceptance in the mail, regardless of whether it is actually received by the offerror.
Mutual assent is often described as a “meeting of the minds.” Evidence of mutual assent in written contracts generally consists of the parties’ signing the contract and delivery of the contract with the intent to bind. To determine whether a meeting of the minds existed, a court reviews what the parties actually said and did. The parties’ failure to agree on a material term precludes a meeting of the minds necessary for a valid contract.
In some cases, what appears to be a valid offer and acceptance results in only a voidable contract because one party’s consent was, in fact, procured by fraud, undue influence, duress, or mistake.
Under Texas law, a party must protect personal interests by reading a contract before signing it. Absent fraud, the person is not excused from the consequences of failing to meet this obligation. If a person signs a contract without knowledge of its contents, they are presumed to have consented to the terms of the contract. Claims of belief that provisions differed from those plainly set out in the written contract are not generally admissible.
Sunday, October 25, 2009
Sealing the Deal – Contracts (A Smart Investment) - Part II
There are two primary types of contracts: express contract and implied contract. The express contract is formal, and stated either verbally or in writing. The implied contract is one that is not written down, but considered to be understood between the parties. It is a matter of inference and deduction.
Though most oral contracts are not legally binding, they are undertaken on ethical principles. In the United States every contract for that sale of goods that involves an amount that exceeds $500.00 must be written to be legally enforceable. The courts generally recognize any defined meeting of the minds of competent persons with a like purpose and intent to undertake some common task as a contract. The Statute of Frauds mandates for some contracts to be enforceable they must be in writing.
There are three ways a term may be implied into a contract:
1. By custom – A contract may incorporate as an implied term any relevant custom. The custom must be well known within a particular trade and business and be generally accepted within such trade or business.
2. By statute – The most common terms implied by statute are those relating to the sale and supply of goods and services. The Sale of Goods Act of 1979 provides for implied terms in respect of: 1) that the seller has the right to sell the goods 2) that goods sold are of satisfactory quality; 4) that goods sold are reasonably fit for the purpose they were bought; and 5) that goods sold by sample correspond with the sample. The Supply of Goods and Services Act of 1982 states with regard to implied terms in a contract that the service will be carried out with reasonable care and skill, within a reasonable time and for a reasonable price.
3. By the Court – Courts do not like to interfere in the construction of contracts. They will only imply terms into a contract under certain circumstances and with certain pre-conditions. Terms can be implied in fact or in law.
A contract implied in fact is one in which the circumstances imply the parties have reached an agreement even though they have not done so expressly.
A contract implied in law (the quasi-contract) is not an actual contract, but a means for the courts to remedy situations in which one party would be unjustly enriched were he or she not required to compensate the other. If one party has agreed to a term, but the other party has not, it will not be implied into a contract. Further, terms will not be implied into a rigorous contract with detailed written terms where any omission would be deemed to be deliberate.
Express terms of a contract outline the primary obligations of the parties. Distinction has been made among the various types of express terms. This distinction is important as it sets apart the remedies available to the innocent party in the event of a breach. Such terms fall into three categories:
1. Conditions – the major terms of the contract.
2. Warranties – the minor terms of the contract.
3. Miscellaneous terms – neither conditions or warranties.
An implied term cannot contradict an express term. However, it may widen or narrow an express term when necessary if the express term is flexible.
The basic rule is that parties to contracts must perform as specified in the contract unless (1) the parties agree to the change in the contract's terms, or (2) the actions of the party who deviates from the terms of the contract are implicitly accepted ("ratified") by the action or non-action of the other party. If there is no acceptance of deviation from the terms of the contract, and the deviation is serious enough to make any real difference in the intended result of the contract, then the deviating party is said to have breached the contract. His justified prevention or interference with the performance of the other party is also a breach. Of course if one party fails more or less entirely to perform the contract, or totally prevents the performance of the contract by the other party, the situation is straightforward. The situation becomes more complex where the argument is over specific terms such as the quality of materials or the timing of work. Breach of contract leaves the non-performing or improperly performing party open to a claim for damages by the other party. If the breach is a material breach, the non-breaching party is relieved of his obligations under the contract by the other party's breach. There are many possible ways for performance of a contract to give rise to dissatisfaction. The courts have been forced to analyze the matter in much more subtle terms than "breached" or "not breached." The doctrine of "substantial performance" saves a party who has largely fulfilled his obligations under a contract from suffering major loss merely because he has unintentionally fallen short in some particular manner which does not affect the essence of the contract.
A breach is not defined as promises laid out explicitly in a contract, rather a breach of contract is defined as any violation of law, principal or obligation. It is this definition of breach that leaves room for parties to file suits involving breaches of implied contracts.
Though most oral contracts are not legally binding, they are undertaken on ethical principles. In the United States every contract for that sale of goods that involves an amount that exceeds $500.00 must be written to be legally enforceable. The courts generally recognize any defined meeting of the minds of competent persons with a like purpose and intent to undertake some common task as a contract. The Statute of Frauds mandates for some contracts to be enforceable they must be in writing.
There are three ways a term may be implied into a contract:
1. By custom – A contract may incorporate as an implied term any relevant custom. The custom must be well known within a particular trade and business and be generally accepted within such trade or business.
2. By statute – The most common terms implied by statute are those relating to the sale and supply of goods and services. The Sale of Goods Act of 1979 provides for implied terms in respect of: 1) that the seller has the right to sell the goods 2) that goods sold are of satisfactory quality; 4) that goods sold are reasonably fit for the purpose they were bought; and 5) that goods sold by sample correspond with the sample. The Supply of Goods and Services Act of 1982 states with regard to implied terms in a contract that the service will be carried out with reasonable care and skill, within a reasonable time and for a reasonable price.
3. By the Court – Courts do not like to interfere in the construction of contracts. They will only imply terms into a contract under certain circumstances and with certain pre-conditions. Terms can be implied in fact or in law.
A contract implied in fact is one in which the circumstances imply the parties have reached an agreement even though they have not done so expressly.
A contract implied in law (the quasi-contract) is not an actual contract, but a means for the courts to remedy situations in which one party would be unjustly enriched were he or she not required to compensate the other. If one party has agreed to a term, but the other party has not, it will not be implied into a contract. Further, terms will not be implied into a rigorous contract with detailed written terms where any omission would be deemed to be deliberate.
Express terms of a contract outline the primary obligations of the parties. Distinction has been made among the various types of express terms. This distinction is important as it sets apart the remedies available to the innocent party in the event of a breach. Such terms fall into three categories:
1. Conditions – the major terms of the contract.
2. Warranties – the minor terms of the contract.
3. Miscellaneous terms – neither conditions or warranties.
An implied term cannot contradict an express term. However, it may widen or narrow an express term when necessary if the express term is flexible.
The basic rule is that parties to contracts must perform as specified in the contract unless (1) the parties agree to the change in the contract's terms, or (2) the actions of the party who deviates from the terms of the contract are implicitly accepted ("ratified") by the action or non-action of the other party. If there is no acceptance of deviation from the terms of the contract, and the deviation is serious enough to make any real difference in the intended result of the contract, then the deviating party is said to have breached the contract. His justified prevention or interference with the performance of the other party is also a breach. Of course if one party fails more or less entirely to perform the contract, or totally prevents the performance of the contract by the other party, the situation is straightforward. The situation becomes more complex where the argument is over specific terms such as the quality of materials or the timing of work. Breach of contract leaves the non-performing or improperly performing party open to a claim for damages by the other party. If the breach is a material breach, the non-breaching party is relieved of his obligations under the contract by the other party's breach. There are many possible ways for performance of a contract to give rise to dissatisfaction. The courts have been forced to analyze the matter in much more subtle terms than "breached" or "not breached." The doctrine of "substantial performance" saves a party who has largely fulfilled his obligations under a contract from suffering major loss merely because he has unintentionally fallen short in some particular manner which does not affect the essence of the contract.
A breach is not defined as promises laid out explicitly in a contract, rather a breach of contract is defined as any violation of law, principal or obligation. It is this definition of breach that leaves room for parties to file suits involving breaches of implied contracts.
Wednesday, August 26, 2009
Debt Recovery Concerns
Awarding credit is a fundamental facet of American finance and worldwide business. It helps nascent companies get off the ground by providing vital capital, which in turn allows the economy to grow and business opportunities to be created. There is, however, another side to credit funding. The very nature of an individual or a company creating debt to obtain needed capital creates short and long term problems. While companies hope that their business plan is solid and promising enough to achieve cash flow and growth while allowing for repayment of their debts, the fact is that sometimes credit-driven investments do not create projected returns, making for a potentially unpleasant situation for borrowers and lenders alike. When debtors fail to repay debt as promised, more often than not the creditor will have multiple remedies under state and federal law.
During a prolonged economic recession such as the one we are now experiencing, there is a noted increase in both the frequency and promptness of debt collection. As lending companies are themselves not immune to the current recession, timely recovery of past due sums is becoming an increasingly critical consideration. Following a default, lenders should pursue reimbursement within whatever timeframe is appropriate under then relevant circumstances. Regardless of whether or not your decision comes at an inconvenient time for the indebted party, the fact remains that a lender has rights that permit prompt recovery to effectively carry out their business.
In order to properly ensure that delinquent sums due are eventually received, two useful allies are reputable debt collectors/debt collection agencies and attorneys with experience in credit/debt resolution, bankruptcy, or related areas. The two will often work in collaboration, as legal enforcement may be necessary to bring about prompt settlement. It is recommended that the debt collector you retain be local to the area where your debtor is located, as often times localized nuances of business procedures, federal, state, and city statutes, etc. can limit the effectiveness of collectors based elsewhere who are likely to be less familiar with these statutory obligations. Your attorney should be licensed in the state of the debtor.
Significantly, one must address missed payments promptly, and give careful consideration to elevating your collection efforts by turning to legal and financial professionals. Many of the rules and laws at work in the field of credit lending are highly complex, greatly increasing the possibility of errors without third party assistance. Following default, the longer you wait to take action, the more complicated the collection process can become while lowering the prognosis for successful recovery. While not all delinquent payments are the result of intentional nonpayment, the majority of them are, calling for prompt action to avoid “stale claims.” Generally, if you feel as though legal action is the next necessary step, this is very likely the case.
By Alexander Newgard, Administrative Clerk, The Nacol Law Firm PC
During a prolonged economic recession such as the one we are now experiencing, there is a noted increase in both the frequency and promptness of debt collection. As lending companies are themselves not immune to the current recession, timely recovery of past due sums is becoming an increasingly critical consideration. Following a default, lenders should pursue reimbursement within whatever timeframe is appropriate under then relevant circumstances. Regardless of whether or not your decision comes at an inconvenient time for the indebted party, the fact remains that a lender has rights that permit prompt recovery to effectively carry out their business.
In order to properly ensure that delinquent sums due are eventually received, two useful allies are reputable debt collectors/debt collection agencies and attorneys with experience in credit/debt resolution, bankruptcy, or related areas. The two will often work in collaboration, as legal enforcement may be necessary to bring about prompt settlement. It is recommended that the debt collector you retain be local to the area where your debtor is located, as often times localized nuances of business procedures, federal, state, and city statutes, etc. can limit the effectiveness of collectors based elsewhere who are likely to be less familiar with these statutory obligations. Your attorney should be licensed in the state of the debtor.
Significantly, one must address missed payments promptly, and give careful consideration to elevating your collection efforts by turning to legal and financial professionals. Many of the rules and laws at work in the field of credit lending are highly complex, greatly increasing the possibility of errors without third party assistance. Following default, the longer you wait to take action, the more complicated the collection process can become while lowering the prognosis for successful recovery. While not all delinquent payments are the result of intentional nonpayment, the majority of them are, calling for prompt action to avoid “stale claims.” Generally, if you feel as though legal action is the next necessary step, this is very likely the case.
By Alexander Newgard, Administrative Clerk, The Nacol Law Firm PC
Thursday, June 25, 2009
Sealing the Deal: Contracts – A Smart Investment
The Importance of Employment Contracts
An employment contract is a legal agreement between an employer and employee in which the terms and conditions of employment are spelled out. Though there is a body of statute law which governs specific aspects of the employer/employee relationship, such laws only form part of the basis upon which the employment relationship is based. Other areas of the employment relationship are based on the written terms and conditions given by employers to their employees, which function to work in conjunction with existing statute law to specify and define an employee’s rights and obligations.
An employer must within two months of the start of employment provide the employee with written terms and conditions of employment. There are different formats in which these terms and conditions may be presented, which include the following:
1. A formal legal contract which is signed by both parties. The terms are often negotiable and can be tailored to include terms very specific to the individual position and the employee concerned.
2. A “letter agreement” which may be detailed, or which simply sets out the minimum information required under the Terms of Employment Act of 1994. This letter is normally signed by the employee as an acceptance of the position offered. This letter might not contain sufficient detail to inform the employee fully of their terms and conditions and may not be adequate to protect the employer.
3. A handbook may be presented which will comprise of the terms and conditions of employment. The employee is normally asked to sign an acknowledgment of receipt and acceptance of the terms and conditions of employment contained in the handbook. The negative consequence of the handbook is that it applies for all employees and specific terms are not negotiable as they would be in a formal contract in the form of a traditional legal document.
The Term of Employment Act of 1994 requires some employers within two months of an employee beginning employment to set out in writing the terms and conditions of the job and to specifically include, but are not limited to, the following:
Name of employer
Name of employee
Place of employment
Job title
Location of work (and if location may also be elsewhere or outside the state than further details must be given by the employer)
Start date
End date (if a temporary contract)
Work hours and details of overtime pay
Pay and frequency of payment
Benefits, such as bonus scheme, health insurance, 401(k), retirement, use of company car, payment of tuition fees, etc.
Holiday entitlements
Details of any sick pay scheme
Details of pension scheme
Minimum notice to end the employment relationship must be given by both employer and employee.
Employees can ask for written terms and conditions at any time and the employer must provide same within two months. If a person has been in employment since before the Terms of Employment Act of 1994 and has never been issued written terms and conditions or a contract of any type, the employee is still entitled to receive a written copy of these terms. If, however, an employee has been in employment without a contract, an employer cannot force an employee to sign a contract of employment and employment will continue under the “custom and practice” created between the employer and employee.
The employment contract is equally as important to the employer as the employee. Employers can use contracts to their advantage, especially in times when jobs are scarce. Employment contracts often set out such things as probationary periods, sick pay scheme, additional leave which might be taken, pension scheme and any further benefits to be provided by the employer.
The great advantage to the employer is there, in some cases, are many items which can be included to protect the employer such as a restrictive covenant restricting a former employee from taking employment within a specified geographical area, a clause which would prohibit a former employee from doing business with the employer’s clients for a specified period of time or a confidentiality clause wherein the employee must keep all trade secrets of the employer confidential. Employers can set out the minimum notice an employee must give to terminate employment.
Employment contracts should be well drafted and should include proper protection for both the employee and employer. A well drafted contract may save a company thousands of dollars in legal fees.
An employment contract is a legal agreement between an employer and employee in which the terms and conditions of employment are spelled out. Though there is a body of statute law which governs specific aspects of the employer/employee relationship, such laws only form part of the basis upon which the employment relationship is based. Other areas of the employment relationship are based on the written terms and conditions given by employers to their employees, which function to work in conjunction with existing statute law to specify and define an employee’s rights and obligations.
An employer must within two months of the start of employment provide the employee with written terms and conditions of employment. There are different formats in which these terms and conditions may be presented, which include the following:
1. A formal legal contract which is signed by both parties. The terms are often negotiable and can be tailored to include terms very specific to the individual position and the employee concerned.
2. A “letter agreement” which may be detailed, or which simply sets out the minimum information required under the Terms of Employment Act of 1994. This letter is normally signed by the employee as an acceptance of the position offered. This letter might not contain sufficient detail to inform the employee fully of their terms and conditions and may not be adequate to protect the employer.
3. A handbook may be presented which will comprise of the terms and conditions of employment. The employee is normally asked to sign an acknowledgment of receipt and acceptance of the terms and conditions of employment contained in the handbook. The negative consequence of the handbook is that it applies for all employees and specific terms are not negotiable as they would be in a formal contract in the form of a traditional legal document.
The Term of Employment Act of 1994 requires some employers within two months of an employee beginning employment to set out in writing the terms and conditions of the job and to specifically include, but are not limited to, the following:
Name of employer
Name of employee
Place of employment
Job title
Location of work (and if location may also be elsewhere or outside the state than further details must be given by the employer)
Start date
End date (if a temporary contract)
Work hours and details of overtime pay
Pay and frequency of payment
Benefits, such as bonus scheme, health insurance, 401(k), retirement, use of company car, payment of tuition fees, etc.
Holiday entitlements
Details of any sick pay scheme
Details of pension scheme
Minimum notice to end the employment relationship must be given by both employer and employee.
Employees can ask for written terms and conditions at any time and the employer must provide same within two months. If a person has been in employment since before the Terms of Employment Act of 1994 and has never been issued written terms and conditions or a contract of any type, the employee is still entitled to receive a written copy of these terms. If, however, an employee has been in employment without a contract, an employer cannot force an employee to sign a contract of employment and employment will continue under the “custom and practice” created between the employer and employee.
The employment contract is equally as important to the employer as the employee. Employers can use contracts to their advantage, especially in times when jobs are scarce. Employment contracts often set out such things as probationary periods, sick pay scheme, additional leave which might be taken, pension scheme and any further benefits to be provided by the employer.
The great advantage to the employer is there, in some cases, are many items which can be included to protect the employer such as a restrictive covenant restricting a former employee from taking employment within a specified geographical area, a clause which would prohibit a former employee from doing business with the employer’s clients for a specified period of time or a confidentiality clause wherein the employee must keep all trade secrets of the employer confidential. Employers can set out the minimum notice an employee must give to terminate employment.
Employment contracts should be well drafted and should include proper protection for both the employee and employer. A well drafted contract may save a company thousands of dollars in legal fees.
Tuesday, May 12, 2009
Sealing the Deal: Contracts – A Smart Investment (Part 1)
A legal contract is an important tool for businesses both large and small. Unfortunately, we live in a very litigious society and the days of the simple handshake to finalize a deal are, for the most part, over. Scrimping to save on costs at the beginning of a project may cost your company tens of thousands of dollars in the long run. Be careful of boiler plate contract forms. While they may spell out certain legal rights, they may also fail to include other vital provisions that will negate future disputes. Every contract should be read thoroughly and should you find a provision to be unclear, ask questions. If the terms of a contract are vague or excessively one-sided, you may end up unnecessarily in court. Both parties should gain value from the contract. Clear contracts make for happy profitable business relationships.
A contract should clearly define the terms of the parties and spell out exactly what the project entails. It formalizes the agreement, clarifies communications, and provides a predetermined recourse for when things go wrong. It may include payment terms or conditions, protection of trade secrets, restrictive geographic scopes, timelines, warranties, exclusions, cancellation clauses, penalty clauses, etc. A good contract keeps energies focused on the underlying project and allows the parties to get things done more efficiently. Therefore, a contract must not only be clear, it must also be concise.
A contract becomes increasingly important in times of dispute. A lack of clarity in a contract can lead to costly litigation. Remember, in a court of law, a written contract trumps an oral contract. To coin a phrase, “the written pen is mightier than the tongue.” In other words, in instances where written and oral portions of a contract contradict each other, the written portion prevails. Disputes can be minimized if the hard-line terms are negotiated and spelled out at the beginning of the relationship when the contract is being formed.
Some essentials to consider when creating a contract are as follows:
1) Parties to the agreement should be spelled out
2) There should be some consideration offered for the agreement
3) Parties should be competent to contract. All persons are legally authorized to contract except the following:
a) Minors, who are under 18 years of age.
b) Mentally incompetent persons
c) Persons ineligible from entering into contract by law
4) Free consent to the agreement
5) Object of agreement should be lawful
6) Detailed description of the duties and obligations of the parties
7) Representations concerning warranties
8) Confidentiality clauses
9) The force majeure clause which generally provides that no party will be liable for non-performance arising out of an event of force majeure e.g. war, terrorist act, epidemic
10) The terms of the agreement between the parties should be specific
11) Events on occurrence of which the contract will be terminated should be specific
12) A method of giving notice for breach and providing the breaching party a time to cure (generally a party who has suffered due to a breach of contract can claim damages that will put the non-breaching party in the position they would have been in if the contract had been performed)
13) Relief available to one party on the breach of the other party
14) Arbitration or mediation clause
15) Termination or duration of contract
There are many forms of contracts, to be discussed in Part II of Sealing the Deal: Contracts – A Smart Investment.
Nacol Law Firm PC
Law office of Attorney Mark Nacol
Serving the Dallas / Fort Worth Metroplex for over 30 years
Tel: 972-690-3333
A contract should clearly define the terms of the parties and spell out exactly what the project entails. It formalizes the agreement, clarifies communications, and provides a predetermined recourse for when things go wrong. It may include payment terms or conditions, protection of trade secrets, restrictive geographic scopes, timelines, warranties, exclusions, cancellation clauses, penalty clauses, etc. A good contract keeps energies focused on the underlying project and allows the parties to get things done more efficiently. Therefore, a contract must not only be clear, it must also be concise.
A contract becomes increasingly important in times of dispute. A lack of clarity in a contract can lead to costly litigation. Remember, in a court of law, a written contract trumps an oral contract. To coin a phrase, “the written pen is mightier than the tongue.” In other words, in instances where written and oral portions of a contract contradict each other, the written portion prevails. Disputes can be minimized if the hard-line terms are negotiated and spelled out at the beginning of the relationship when the contract is being formed.
Some essentials to consider when creating a contract are as follows:
1) Parties to the agreement should be spelled out
2) There should be some consideration offered for the agreement
3) Parties should be competent to contract. All persons are legally authorized to contract except the following:
a) Minors, who are under 18 years of age.
b) Mentally incompetent persons
c) Persons ineligible from entering into contract by law
4) Free consent to the agreement
5) Object of agreement should be lawful
6) Detailed description of the duties and obligations of the parties
7) Representations concerning warranties
8) Confidentiality clauses
9) The force majeure clause which generally provides that no party will be liable for non-performance arising out of an event of force majeure e.g. war, terrorist act, epidemic
10) The terms of the agreement between the parties should be specific
11) Events on occurrence of which the contract will be terminated should be specific
12) A method of giving notice for breach and providing the breaching party a time to cure (generally a party who has suffered due to a breach of contract can claim damages that will put the non-breaching party in the position they would have been in if the contract had been performed)
13) Relief available to one party on the breach of the other party
14) Arbitration or mediation clause
15) Termination or duration of contract
There are many forms of contracts, to be discussed in Part II of Sealing the Deal: Contracts – A Smart Investment.
Nacol Law Firm PC
Law office of Attorney Mark Nacol
Serving the Dallas / Fort Worth Metroplex for over 30 years
Tel: 972-690-3333
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