Basic Contracts Law: For Small Business Owners and

Independent Contractors

Basic Contracts Law: For Small Business Owners and

Independent Contractorspresented by

Ryan K. Hew, Attorney at Law

535 Ward Avenue, Suite 206Honolulu, hi 96814

presented by Ryan K. Hew, Attorney at Law

535 Ward Avenue, Suite 206Honolulu, hi 96814

DISCLAIMERDISCLAIMER

• THE INFORMATION FOUND ON THE FOLLOWING SLIDES ARE MEANT FOR AN ORAL PRESENTATION. ALL THE INFORMATION FOUND ON THE SLIDES ARE NON-SPECIFIC AND GENERAL. NO PERSON SHOULD RELY ON THEM TO LEGALLY ACT OR REFRAIN FROM ACTING. IF YOU NEED LEGAL ADVICE CONTACT AN ATTORNEY IN YOUR RELEVANT JURISDICTION. MAHALO.

OutlineOutlineIntroduction

What is a Contract? How is a Contract Formed?

Boilerplate Provisions: They are Important!

Suing for Breach of Contract: Remedies

F.A.Q.s

7 Practical Tips for Contracts

IntroductionIntroduction

Ryan K. Hew, Attorney at Law, JD/MBA

I focus on transactional and compliance work.

Preventative law is all about avoiding suits.

For contracts, attention to detail and making assumptions about the future are key. In addition, knowing how the deal was negotiated plays a vital role to interpretation.

What is a Contract?What is a Contract?

Basic: a promise for a promise (or an act)

A contract (express or implied) has 4 elements:

Capacity (your ability to enter into a contract);

Mutual agreement (“meeting of the minds”)(offer and acceptance);

Consideration (something of value exchange);

Legality (only legal deals - no slavery, usury, drug deals).

How is a Contract Formed?

How is a Contract Formed?

Valid Contracts are Enforceable (both parties have rights) vs. Unenforceable (missing a requirement):

Capacity - legally competent

minors/intoxicated/insane = NOT

Void = not valid from the start (physical duress)

Voidable = binding on one side (minor)(mental duress) - a child can reject the contract

How is a Contract Formed? cont.

How is a Contract Formed? cont.

Mutual Assent - “meeting of the minds”

Offer - intent + definite + communicated to the other side: this becomes basis of terms

Acceptance - clear and unqualified

Counter-offer - qualification causes the offeree becomes offeror

How is a Contract Formed?

How is a Contract Formed?

Consideration - is a bargained-for-exchange: it is the this-for-that concept - it can be an action or refrain from taking action, BUT:

illusory promises, gifts, past consideration, already obligated to do, moral obligations are not valid consideration.

Promissory Estoppel - where one side detrimentally relies on a promise on the other (Examples: person who moves for a job, the offer is rescinded after the person moves or a nonprofit making expenditures for a promised contribution that is never made).

Boilerplate Provisions: They Are Important!

Boilerplate Provisions: They Are Important!Attorneys Fees and Costs - losing party in suit pays

ADR - mediation? arbitration? both?

Choice of Law - What state’s laws will apply in a dispute?

Jurisdiction - Where a lawsuit must be filed in a dispute?

Waiver - agreeing to give up the right to sue for a breach for a part of a particular provision w/o giving up future claims regarding that provision. (i.e just because I don’t enforce it now, doesn’t mean I won’t enforce it later)

Severability - invalid provisions, will not invalidate the whole agreement

Integration - what you see written is the whole agreement

Boilerplate Provisions: They Are Important!

Boilerplate Provisions: They Are Important!Notice - what is proper notice/how is it handled?

Relationships - you are not a partnership/employment

Assignability/delegation - can you assign the rights/delegate the duties under the contract?

Limit on Damages - (discussed later)

Warranties - promises and assurances regarding the contract obligations (i.e. I warrant I own this stuff I am selling to you.)

Indemnification - one (or both) parties guarantees that it will cover the costs of disputes brought by 3rd parties

Counterparts - you can execute copies without needing everyone to be present at the same time to sign

Suing for Breach of Contract

Suing for Breach of Contract

What is the Contract worth?

Efficient breach: it is valuable to break a contract for a more favorable deal.

Remedies: Look to the contract first!

compensatory - to compensate you for the breach: put you where you would have been if no breach occurred.

consequential - have the breaching side pay for all the problems that arose from the breach (usu. limited)

punitive - only available if the breaching party was willful and reckless, usually never awarded - only by statute or a business tort claim - contract law isn’t about punishment

liquidated - the contract may have a formula built-in for breaches, BUT it must be fair - if a penalty fee is disguised as a liquidated clause a court will not enforce it

F.A.Q.sF.A.Q.sQuestion: Are oral contracts valid?

Yes. Express contracts are stated in words, whether oral or written. Problem is evidence (“he said, she said”).

Some deals must be evidenced in writing:

paying another’s debt;

sale of land interest (property law);

performance takes longer than 1 year; and

sale of goods for $500.00 or more.

F.A.Q.sF.A.Q.sQuestion: Can an email be a contract?

Yes. A contract is a promise for a promise/act.

If a series of written documents evidences all the requirements of a contract - you have a contract!

This raises the point of implied contracts:

implied by conduct/actions (versus words);

implied by law court will create a contract to avoid one side benefitting at the expense of the other.

F.A.Q.sF.A.Q.sQuestion: Is silence acceptance?

No. The offeror can never impose a duty to the offeree to do something, as their is no previous obligation, BUT:

if the offeree does take action;

in mutual agreement both parties agree silence is acceptance; and

prior dealings, the parties have shown silence to be acceptance.

F.A.Q.sF.A.Q.s

What is the statute of limitations for a contract claim (i.e. if there is a breach how many years can the nonbreaching party bring a suit)?

Haw. Rev. Stat. § 657-1 et seq.: 6 years

F.A.Q.sF.A.Q.sQuestion: Are boilerplate provisions enforceable?

Most of the time yes, as they are often ignored, and what people don’t realize, many of them are key in a breach or for a suit. Some of the provisions are unenforceable.

Adhesion Contracts - unfair terms, when the difference in leverage between the two parties is big (mostly consumer law).

F.A.Q.sF.A.Q.sAre noncompetes and NDAs enforceable?

NCAs are enforceable (except in Cali) - risk to the company vs. person’s ability make a living AND public good:

duration - 3 or 30 years?

geographic restriction - C&C of HNL or U.S.A?

scope of restriction - industry-limited or wide?

NDAs are enforceable if you can show:

existence of a trade secret/confidential information;

that the secret/information was acquired improperly or as a result of the relationship; and

that there was actual/threatened unauthorized use of the secret/information.

7 Practical Tips7 Practical TipsAttorneys can draft whatever you want, but always consider a) legality and b) your ability to supervise/enforce your own agreement.

Ambiguity is construed against the drafter, so think when deciding who should draft the agreement.

Develop an exit strategy, should you need to repudiate a contract.

If you are the non-breaching party, try communicating first, then consider not paying, ADR, then lawsuit last.

Don’t make promises over email. Use a phone or have an in-person meeting.

Consider MOUs/LOIs for short-term deals that the details need to be filled in over time.

A Contract Audit should be performed periodically to determine what obligations you owe and are owed outstanding AND gives you time to consider re-negotiating some contracts.

Thank YouThank You

Mahalo for coming.

If you have further questions or contract drafting needs please contact me at:

Email: ryankhew@hawaiiesquire.com

Office Phone: (808) 944-8400