Lesson Five
Contract English
Part I Objectives
Main characteristics of a contract
合同的特性
Contract review: Checking for key elements of a contract
合同的重要組成部分
Commonly used legal terms
常用法律用語
Some tips on easy understanding of contract lingo
掌握合同專用語的一些相關技巧
Part II The How-Tos
What You Should Know About a Contract
Why Do I Need A Contract
爲什麼需要合同
You don’t have to be a lawyer to reap the benefits of writing your own contracts. A little common sense goes a long way and a good contract does more that just cover your rear should you end up in court. Written correctly, a contract can demonstrate business professionalism, weed out insincere clients, organize your duties, speed up your pay, help you get insurance, avoid disputes, make mutual obligations clear and keep you out of court.
What is a Contract
什麼是合同
A contract is a legally binding agreement. Contracts are either formal (written) or simple (verbal). It may be a bilateral contract, performed by both parties, or unilateral, a promise in exchange for an act or performance of a task or deed. Contracts may be voided, that is, the parties may agree to nullify the contract or it may be voided by a court of law. These are some of the characteristics of a contract.
Elements of a Good Contract
合同的要素
Every good contract has four essential component parts. They are: offer and acceptance, mutuality and consideration, competent parties, and a legal object.
An offer is communicated verbally or in writing and has definite terms. Mutuality indicates duties or actions are performed by each party. Consideration means that something of value is exchanged. Competent parties speak to the mental and legal capacity of the parties involved in making the contract. A legal object connotes a legal objective and no criminal intent.
Contracts don’t have to be formal: a letter of agreement is a contract too. In fact, a contract can be anything — it can be oral, can be written on a napkin(though not advised), can be a purchase order or a combination of documents exchanged between parties. It has no particular form. Written is better, though, then the terms are less often questioned.
To construct your own contract, specify the issues and conditions that matter. Independent consultants, for example struggle with Internal Revenue Service rules that threaten to reclassify them as employees. In an independent contractors contract state “the contractor is an independent contractor and not an employee.” That will protect the business identity and relieve your client of the fear that they will end up having to pay your health insurance premiums and Social Security taxes.
Include specific services your are to perform and deadlines. Detail a payment schedule that is suitable to both parties. If intellectual property (i.e., software, reports, manuals) is involved, include details about who owns the rights and the extent of those rights. If your work is project-based, include a description of when the job will end. That can be the delivery of the final report, etc.
So, how do you write your own contract It is easier than it may appear. Several software packages exist to help you with the chore. Look also for printed forms. However, they are not as easily customized to your needs as software packages.
Get a good set of forms, fill them in and spend less on lawyers. Your understanding of the principles of contracts, their uses and limitations are sure ways to cut legal bills or avoid them altogether. It will also prevent murky situations in which inexperienced professionals find themselves and to avoid litigation.
Contract Review - A checklist for you
Start evaluating your contract by doing a quick check of the critical basic elements. In most states, for a written contract to be enforceable, it must at a minimum:
·Identify the Parties. Many form contracts used by small businesses include spaces for the names of the contracting parties, but in a harried workplace, these blocks don’t always get filled in. Avoiding a loss in a contract dispute because the parties to the contract have not been identified should be a "no brainer." Simply make sure that you and your employees ALWAYS (legibly, if done by hand) the names of the parties in the appropriate spaces on the contract.
·Describe the Subject Matter. A contract must adequately describe the subject matter of the agreement. In a contract for services, for in stance, the contract should state that the contract is for the performance of services and those services should be clearly described. How ever, if the contract is for the sale of goods, it should clearly indicate that the parties have agreed to a sale of goods. Making it clear that the parties understood and agreed in advance that the contract was for the sale of goods, not services, or vice versa, will make sure that the correct body of law is applied in the event of a dispute. For example, the Uniform Commercial Code (adopted in some form by all states and known as the UCC) applies only to the sale of goods. All other types of contracts are generally governed by the more imprecise and varied statutory and common law of each state. In some cases, it is not always clear whether the contract is for the sale of goods or services. If there is any doubt, you should consult an attorney to determine how to characterize the description of the subject matter of your contract.
·State the Material Terms. Every contract must state the material terms and conditions of the contract. Under the Uniform Commercial Code the only material term necessary for an enforceable contract is a term stating the quantity of goods to be sold. In the event of a dispute, the Uniform Commercial Code permits a court to fill in the unstated or missing terms with what the court deems to be a reasonable price, quality, color, delivery date, interest rate, etc.
·Include a Signature. Every written contract must be signed by the party to be charged in the event of a breach. What this means is that if the seller eventually requires enforcement of a contract against a buyer, the contract must have been signed by the buyer. Conversely, if the buyer wants to force a seller to comply with the terms of a contract, the contract must bear the seller’s signature. A signature by the buyer of goods or services is critical evidence that he or she agreed to the terms of the contract and intended to be bound by them. Most pre-printed form contracts provide the necessary spaces for signatures.
Fine Tuning
After checking your contract for the basic elements, consider some of the following more advanced touches to tweak your contract into better form:
·Integration or Merger Clause. Does the contract contain some language to the effect that the terms contained in the written contract are the only terms agreed to between the parties Including such language can preclude a party, in the event of a dispute, from arguing that additional terms were agreed to orally, or by some other means, at the time the contract was formed. The language could be as simple as stating “This Agreement constitutes the sole agreement of the parties.”
·Choice of Law Clause. Specifying in advance, within the body of the agreement itself, which state’s law will be used in the event of a dispute is a prudent move, for businesses with customers in more than one state. Litigating the same contract in different states under each state’s unique body of contract law can produce widely differing results. By insuring that only a single state’s law is applied, the drafting party can know in advance with some degree of confidence how certain disputes may be resolved. A typical choice of law clause might say: “This Agreement shall be construed and interpreted in accordance with the laws of the State of Oklahoma.”
·Arbitration Clause. It is possible to keep contract disputes from going to court at all by including language in the contract requiring the parties to submit any disputes to arbitration. Arbitration is usually much less expensive and faster than traditional litigation. An arbitration clause in a contract might say: “Any controversy or claim arising out of or relating to this Agreement shall be settled by arbitration in Oklahoma City, Oklahoma, by and in accordance with the Rules of the American Arbitration Association.”
Form contracts are critical tools for any business which buys or sells goods or services. They should be reviewed periodically to make sure they comply with the law and provide the drafter with the terms it needs to do business. Consult with an attorney before adding or changing any language in your existing contracts.