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Answering Contract FAQs with Joshua Brinen

Jul 10, 2024 | Business of Law, Operating Your Company

What makes a contract?

A contract is the meeting of the minds between two or more parties to accomplish a task. A contract is a binding obligation by which each party gives something and gets something to change their position. A contract cannot be sui generous, or of the nature of a gift. A contract must be binding with its elements.

What are the elements of a contract?

The elements of the contract are an offer, an acceptance, and an exchange of consideration. An offer is what it says it is, an offer with defined terms. Under the common law, those defined terms must be sufficient for a court to determine that the offeror and the offeree understood what was being exchanged. Under the Uniform Commercial Code, some of those terms can be filled in by statute. An acceptance is a unconditional acceptance of the offer. If you counteroffer, then that acts as a rejection and a new offer to which the original person who made the offer could reply. Finally, the contract must have consideration, or something given and something got.

What is consideration?

Consideration is what is given and what is gotten from the contract. Under common law, the expression is it must be more than a mere peppercorn, so it must have some amount of substance. The absence of consideration could make a contract invalid.

What is a breach?

A breach of a contract is when one party does not perform, fails to perform, or fails to perform adequately. Now, breaches can come in all shapes and sizes. Some breaches are material. For example, you don’t pay for the goods that you’ve received. That would be a material breach. Some breaches are immaterial. The goods were supposed to arrive on Friday and they arrived on Thursday evening after business hours or on Monday morning. Now, depending on what the goods are and the express terms of the contract, that might be an immaterial breach. Other breaches will very much depend on the facts and circumstances of the contract. For example, if you require green widgets for a specific purpose and the other party understood that you needed green widgets and they delivered yellow widgets, that may be a material breach, but it may not, depending on the facts and circumstances of the contract.

What are the damages to a contract?

Damages to a contract are designed to put the parties in as good a position as if the contract had been fully and properly performed. However, there are various forms of damages. There is expectation damages or actual damages where the amount of damages will put you into a position as if the contract had been performed. A lesser form of damages is restitution damages where the damages will only put you in a position as if you had never engaged in the contract.

Some contracts find it so difficult to measure damages they have a concept called liquidated damages. Liquidated damages are agreed upon damages in case of a breach. There are also equitable remedies to a contract depending on the form and nature of the contract. You can have what’s called specific performance, where the other side that breaches is required to put you in the position as if the contract had been fully performed by completing the contract. This is most often found in real estate and land contracts. There might be nominal damages, damages for the sole purpose of repairing some wear and tear or damages that occurred because of the breach. There are many types of damages to fix a breach of a contract.

What rights does a third party have to a contract?

Depending on the form and nature of the contract, a third party has no rights to a contract unless they are an intended beneficiary or an intended obligor of the contract. In New York, to be an intended third party, you need to be explicitly stated in the contract. While an intended third-party beneficiary is supposed to benefit from the contract, it is possible to be an intended third-party obligor, such as a guarantor of a lease. Generally, all such third-party rights must have either an explicit designation of rights or privity to the contract. Privity to the contract means that you are in line for the beneficial ownership, benefit or obligation to a contract.

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I formerly worked as a satellite employee from my home state of New Jersey. I ended my employment with my former employer in 2016. In 2018, I was sued by my former employer for $1.1 million in Illinois State Court. I was referred to Brinen & Associates, LLC by a friend who is a client of the firm. Brinen & Associates, LLC came highly recommended. I contacted Joshua Brinen and then had a consultation at his office with his colleague Mark White. Together, Messrs. Brinen and White explained my options...

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