April 15th Notes

Business Law
April 15, 2010

Contracts
1. agreement
2. based on offer, acceptance
3. meeting of the minds
4. legality
5. capacity

-Capacity/Consent
-Statute of Fraud
-Drafting Tips

Contractual Capacity
-need the meeting of the minds
-the bases for showing lack of capacity to enter into a contract are:
    -minority
    -intoxication
    -mental incompetence

Contracts with Minors
-18 years old
-are voidable
    -dis-affirmed
    -ratified

Disaffirmance
-a minor may disaffirm or rescind if:
    -disaffirmance is timely and
    -minor returns the consideration received to the extent possible

Ratification
-after becoming an adult, the minor can ratify the contract
-if ratified it is enforceable

Mental Impairment
-same rules as minor

Intoxication
-not a defense to enforcement of a contract
-if it results in ability to understand, then its voidable
-high burden

Genuine Consent
-court can refuse to enforce a contract if the facts were not understood
    -misrepresentation or fraud
    -mistake
    -undue influence
    -duress

Fraud/Misrepresentation
-fraud is intentional
-needs proof, is hard to prove
    -misrepresentation of a material fact
    -intent to deceive
    -justifiable reliance on the deception

Innocent Misrepresentation
-misrepresentation is the unintentional deception
    -involves material fact
    -fact must be within the exclusive knowledge of the person making the misrepresentation
    -not reasonably available to party deceived

Mistake
-two kinds
    -mutual
    -unilateral

Undue Influence
-exists with confidential or fiduciary relationship between contracting parties
-trust was abused and the vulnerable party entered a contract

Duress
-involuntarily entering into a contract, forced to agree
-is voidable

Statute of Frauds
-contracts required to be in writing are enforceable
    -interest to land
    -executor of an estate
    -pay debt of another
    -cannot be performed in a year
    -made in consideration of marriage
    -for sale of goods worth more than $500

WA Statute of Frauds
-require in writing
    RCW 19.36.010  (general)
    RCW 64.04.020  (deeds)
    RCW 62A.2-201  (sale of goods over $500)
    RCW 62A.2A-201  (lease of goods over $1000)

Sufficiency of Writing
-contract or memorandum of contract
    -must be signed by the party to be charged
    -must state reasonable certainty
    -names of parties, subject matter, all essential terms and promises

Parol Evidence Rule
-once contract is written, "parol" or extrinsic evidence to contradict vary or add to its terms
    Unless:
    -court determines the written agreement is incomplete or ambiguous
    -contract was modified
    -evidence is used to prove defense

Negotiating and Drafting the Agreement

Negotiations
-know
    -client's business goals
    -how the contract can further
    -risks in this transaction
    -issues raised by terms
    -balanced control
    -should the agreement address remedies

-meetings with the other party
    -this is not litigation
    -it is not adversarial
    -work to achieve an agreement that is acceptable and clear to all parties

Drafting
-translating the "deal" into a contract
-principles
    -start with a form
    -use clear, unambiguous language
    -be consistent throughout the contract
    -all essential terms

Contract Parts
-preample
-recitals
-words of agreement
-definition of terms
-action section
-substantive business
    -warranties, conditions, covenants
-endgame provisions
-general provisions
-signature lines

Preample
-first paragraph
    -purpose to identify the contract
    -sets out the name of the agreement
    -parties and date the contract is signed

Words of Agreement
-state for the record that the parties agree to the terms

Definitions
-referring to complex concepts

Action Sections
-tells the parties how to perform the principal objective of the contract
    -provisions in which the parties agree to
    -consideration

Substantive Provisions
-representations
-warranties
-covenants
-rights
-conditions
-discretionary authority
-declarations

Endgame Provisions
-what happens when the contract ends
-default
-collateral

General Provisions
-notice provisions
-choice of law
-choice of forum
-anti-assignment clause
-modification
-severability

Signature Lines