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CONTRACTS & COMMERCE

Frequently Asked Questions

What is a Contract?

A contract is an exchange of promises that create legally enforceable duties of performance. It also is basic building block of all trade and commerce, from the local newspaper stand to billion dollar multinational enterprises. A contract is formed when someone makes an offer and another person accepts that offer without change and, as a result of the promises, each gives up something of value (even a legal right).
Contract
If an acceptance is made with any changes to the terms of the original offer, it is considered a rejection of the original offer and a new offer, or a “counteroffer.” Contracts are not always express, but may be implied by conduct that indicates intent to be bound. Courts also may find that a contract existed even where there was no express or implied agreement but one party would be unjustly enriched.

When is there a Breach of Contract?

If a party to a contract has made a promise that creates a duty of performance that is not subject to pre-condition and has not been discharged, a court of law may determine that the failure to perform as specified in the contract is a breach of contract. In addition, it is possible to breach a contract by stating that you will not perform as required (so-called “anticipatory breach”). However, only a material breach of contract will relieve the other party of its duties to perform under the contract and give the non-breaching party a right to immediately seek a remedy for breach of the whole contract. Often, it is challenging to determine who first breached a contract. Before accusing the other party of breach and repudiating further performance of your duties, you should consult an attorney. Back to Top

What are the Consequences of a Breach Of Contract?

A material breach of contract permits the non-breaching party to sue immediately for legal damages (i.e., monetary relief). There are five basic types of damages: compensatory damages, consequential damages, nominal damages, and punitive damages. Compensatory damages can be determined by reference to the lost profit that was expected under the contract (“expectation” damages) or by the cost the non-breaching party incurred under the contract (“reliance” damages). There are different approaches to this proof depending on whether the contract was for a sale of goods, for the sale of real estate, or for various types of service contracts. Consequential damages are those that result from the breach because of reasonably foreseeable special circumstances that were adequately disclosed when the parties formed the contract. Nominal damages are symbolic damages (e.g. $1) where breach has been proven but there was no loss. Punitive damages are designed to punish particularly egregious behavior but are hardly ever awarded in pure breach cases. Liquidated damages are reasonable monetary remedies expressly set forth in the contract because it was difficult to determine the damages that would flow from breach at the time of contract formation. Back to Top

If the legal damages are inadequate, a non-breaching party can sue for equitable relief. An equitable remedy is an order of a court to do some act or to refrain from doing some act. Situations where the legal remedy may be inadequate include any transaction where the subject of the transaction is so unique that money is an inadequate substitute. This remedy typically is available for contracts involving the sale of land or unique goods but not for service contracts. Back to Top

Does the Noncompete Agreement that I signed prevent me from accepting a new job offer?

It depends. Noncompete Agreements (“NCAs”) are valid and enforceable if their terms do not too broadly restrict the geographic or time periods during which a former worker can compete with the company. If the restrictions would unreasonably prevent you from earning a living, a court might be willing to declare the agreement void or to reduce the scope of its application. In addition, as the name suggests, there often is a question of whether the former worker will be competing with the company. The ALP attorney carefully considers the terms of NCAs and the nature of the proposed work when analyzing the legality of client accepting a job offer. Back to Top

What are my options if I was not paid under a contract?

The first thing you should do is contacting an ALP attorney because there are statutes that limit the amount of time for you to recover payments due under contracts. If you wait too long, you may have no options. In addition, if it’s not too late, the ALP attorney can privately advise you about ways to amicably resolve the situation. If necessary and not premature, the ALP attorney can negotiate on your behalf.

If attempts to amicably resolve the matter have been exhausted, the legal options available to you may depend on the terms of the contract, whether it was a contract for goods or for services and, if the latter, whether you were an employee or an independent contractor. Employees of corporations may or may not have certain appeal rights unavailable to independent contractors. Beyond that, employees or independent contractors may have a cause of action based on breach of contract, wrongful termination, or discrimination. If the contract was for goods, Article 2 of the Uniform Commercial Code sets forth available remedies.

These situations can be a basis for bringing a lawsuit requesting a determination of legal damages (i.e., monetary remedies), a court order of payment, statutory remedies, and possibly equitable remedies such as an order to reinstate you to your former employment if you were terminated. Judgments usually have a statutory rate of interest associated with them, and a failure to pay as ordered could lead to a finding of contempt of court and punishment that could include monetary sanctions in the form of an award of attorney’s fees. Back to Top

Work was not performed under a contract – What are my options?

The first thing you should do is contacting an ALP attorney because there are statutes that limit the amount of time you have to legal recourse. If you wait too long, you may have no options. In addition, if it’s not too late, the ALP attorney can privately advise you about ways to amicably resolve the situation. If necessary and not premature, the ALP attorney can negotiate on your behalf or indirectly by advising you.

If attempts to amicably resolve the matter have been exhausted, the legal options available to you may depend on the terms of the contract, including whether the contract was for a provision of goods or services. Remedies for breach of contracts for the sale of goods are governed by Article 2 of the Uniform Commercial Code. Remedies as well as the common law. Remedies for breach of service contracts are governed solely by state law. You should contact ALP to learn more. Back to Top

Traps for the Unwary

Beware of the dangerous game of first breach: You may think that the other party to your contract has wronged you so badly that you should be freed from the requirements of your contract. However, you could be wrong about whether the other party’s breach is material under applicable law. Consequently, it could be YOU who materially breached the contract if you do not perform, which could make you liable to the other party for the FULL VALUE of the contract. Back to Top