Contracts

As an independent contractor, there is no employer-employee relationship with the person or company that you are doing business with.  The independent contract is a consultant who performs specific duties that the consultant is capable of performing.

At the start of the relationship, it is absolutely vital to have an independent contract agreement (also known as a consulting agreement) drafted to protect both parties.  The consequences of failing to establish a consultant as an independent contractor can have dire tax consequences.

In your independent contractor agreement, it is important to establish that the consultant performing the services is is not under the control of the employer.  In addition, the employer may not directly supervise the consultant.

When it comes time to draft an independent contractor agreement, you should focus on the fee for services rendered and provide a complete description of the services that are to be provided.

One of the most basic parts of a contract is describing its subject matter.   The subject matter is the part of the contract where you, the client, has the most imput. Generally, the subject describes the services that are to be perfomed, the goods that need to be sold, the property that needs to be assigned. 

When describing the subject matter of your contract be aware of the following:

  • What are the basic facts of the contract?  A well-drafted contract requires an awareness that words have implications.  For example, during negotiations you may have agreed to purchased gold.  When you receive the contract, the seller may have changed the subject to metals.  This would have serious implications if the seller ships you silver instead of gold.
  • What do common terms really mean?  A common term may change its meaning over time, so it is best to define it in the subject section of the contract.

Your star salesperson has decided to jump ship to a competitor.  She has taken your customer list and has started soliciting for business. What can you do to stop her?

Under New York Contract Law, you may be able to obtain a permanent  injunction against her where she would be prohibited from soliciting your clients. 

A preliminary injunction can be granted in the early stages of a lawsuit. For example, a preliminary injunction may be appropriate to stop a former employee from doing business or soliciting any customers of the corporation who where customers of the company when she was employed by the company.

Generally the company needs to show that there was a written contract between the employer and employee and that the non-solicit clause was reasonable in terms of time and scope.

It is not unusual where you may be purchasing goods that a third party has possession of, such as a warehouse or a bailee.  In such an instance, you should be clear in the contract where the delivery should be made.

Under the UCC, which covers the sale of goods, if the contract is one for goods that are identifiable and are known by both parties to be in a location that is not in possession of either party, then delivery is where the goods are located.   If you agree to purchase a car, and the car is located in warehouse owned by someone else, then the buyer has to pick up the car at the warehouse.

Looking for the right internet agreement for your business. Here is a list of some of the agreements that my office can draft for you.

  • Copyright Assignment
  • Work for Hire Agreement
  • Moral Rights Waiver
  • Copyright Permission letters
  • Framing Agreement
  • Cease-and-Desist Letter for Trademarks
  • Nondisclosure Agreements
  • Submission Agreement
  • Mutual Non-Disclosure Agreement
  • Right of Publicity Agreement
  • Model Release
  • Employment Agreement
  • Employee Nondisclosure Agreement
  • Website Privacy Agreement
  • Consulting Agreement
  • New Employer Letters
  • Software Development and Publishing Agreements
  • Title Development and Publishing Agreements
  • Ghostwriter Agreements
  • Beta Site Test Agreement
  • Prototype License Agreement
  • Website Development Agreement
  • Online Publishing Agreement
  • International Distribution Agreement
  • Co-Branding Agreement
  • Website Terms of Use Agreement
  • Video Clip License Agreement
  • Music Video License Agreement
  • Music Sample Agreement
  • Software Acquisition Agreement
  • Software Licensing Agreements
  • Shrink-Wrap Licenses
  • Videogame Professional Services Agreements
  • Videogame Confidentiality Agreements.

If you are suing for a breach of contract you are probably wondering what money can you collect.  You could also be wondering if there is any other relief that you can obtain from the court. Listed below are the basics of what you can sue for in a breach of contract case:

  1. Compensatory Damages.
  2. Consequential Damages;
  3. Liquidated Damages;
  4. Injunctions and other Equitable Relief.

COMPENSATORY DAMAGES:

If you can prove your breach of contract claim, then the judge usually awards compensatory damages.  The purpose of compensatory damages it make the plaintiff be in the same place as if the contract had been performed.

CONSEQUENTIAL DAMAGES:

If you can prove that the other party knew or could have foreseen when the agreement was made, you can recover consequential damages.

One common issue in a breach of contract case regarding consequential damages is whether you can recover for lost profits.  The general rule is that you can only recover for lost profits if this issue was reasonably foreseeable when you signed the contract and the other party knew of your circumstances or if it is expressly written in the contract. For example, if you plan on opening a restaurant, and the party that you contracted with failed to install a stove, you may be able to recover consequential damages.

LIQUIDATED DAMAGES

When damages will be difficult to assess if a contract is breached, you can agree to a liquidated damages clause in your contract. A liquidated damages clause will state the amount of damages that will be paid if there is a breach.

INJUNCTIONS:

If monetary damages are insufficient, the judge has the power to order an injunction, attachment, specific performance and rescission.

For more reading:

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\"\"New Yorker\’s are a mobile bunch. Especially New York business owners. Business open and close every day.  It is risky to believe that your co-owners will still be with you five years down the line. It is likely that there will come a time when of your co-owners will want to sell his shares or interests in the company to someone else.  One of the most common ways that a small business can get disrupted is when an owner desires to sell or transfer his interests in a company. So, what should you do?  You should create in advance a method for the owners to review and block any that is not in the best interests of the company.  Here are some things you should think about:

  1. Right of First Refusal. This is the most common provision in a buy-sell agreement. The owner who wishes to sell his interests first offers it to his co-owners before anyone else.
  2. Decide the Price of the Ownership Interests in Advance. Often the price will be set at the price a proposed outside buyer has bid.  I do not recommend this option because a fraudulent offer is possible. Another method is to set a pre-determined price at the time a buy-sell agreement is drafted.  Another option is to set a high down payment price which would show good faith.
  3. Make clear the effect of any sale on Minority Owners. Often a right of first refusal provision may freeze out a minority owner from selling his interests.  As a result, it may be important to include a \”Right to a Forced Sale\” clause.
  4. Decide who can buy the interest. Should the company have the right to purchase shares or the individual owners?
  5. Should an owner be able to give away his interest? Often owners wish to grant their interests in a company to a trust for estate planning reasons. This could be problematic because technically the trust would own the shares of the business. Often these issues are addressed when drafting a buy sell agreement.
  6. No Transfer Restrictions. Refusing to transfer any ownership interest is another possibility. This can limited in a few different ways, such a no transfers to certain persons and no transfers without written consent of the other owners.

You should decide in advance what to do if an owner of a business wants to transfer its interests through a buy sell agreement to avoid unnecessary problems and potential litigation.

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If you are planning to sell or buy the assets of a corporation, before you go to your lawyers office you should provide the answers to the  following questions:

  • Names and addresses of everyone involved in the sale
  • All assets and property that will be in part of the sale
  • What monies are being paid?
  • What are the debts and liabilities of the company?
  • Will the consideration be paid in installments or a lump sum?
  • When will payment be due?
  • Have all due diligence documents been obtained?  For example, have you inspected the books, property or business records?
  • Agree on a closing date
  • Are there any warranties?
  • Any intellectual property, such as the use of the company name be transferred?
  • Who pays any potential taxes?
  • Are there any employee agreements?
  • Are there any leases?
  • What happens if one party defaults?
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Q:   What happens if you enter into an Agreement and there is ambiguous language?\"\"

A:   If the person making the offer means one thing and the person accepting the offer reasonably means another, then there is no contract.  Be aware that just because you failed to put something into a contract or there was a mistake, does not mean it the contract is ambiguous.

The court looks at the contract as a whole to determine whether a contract is ambiguous.

Remember, courts only enforce contracts, they will not re-write them.

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In New York, a void contract is simply no contract at all. It binds neither party.  If you enter into a void contract, nothing more has to be accomplished on your part.  It is binding by neither party and cannot be ratified.

Contracts that are usually considered voidable when one of the parties has the ability either to avoid or validate the agreement.

Once you perform the duties and obligations of a contract, it cannot be considered voidable.

For more information on void or voidable contracts, contact me at 212-233-0666.

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