Contracts Introduction Offer Acceptance Contract Definition An agreement exchange of promises that can be enforced in court We ll look at 2 areas of contract law o Ex A promises to let B use a certain trademark that A owns If someone wanted to use the FSU trademarked unconquered you need to go through FSU and make a contract that allows you to use the trademark in only a specific class of markets and for up to a certain amount of time you might then promise to pay a royalty based on percentage of sales This is a bilateral contract when a promise is made for another promise This could be the basis for an enforceable contract o The common law applies to services intangibles real estate Older than UCC relates to anything that does not apply to UCC Ex trademark licensing employment etc o The Uniform Commercial Code UCC applies to the sale of goods Strictly sale not licensing leasing etc Ex when you lease a car you have a stick of ownership not the whole bundle Ex boat car piece of jewelry Has to be tangible i e not trademarks Anything sold on craigslist or ebay is a UCC transaction o Every state has both types of law Contract law is state law Practical Considerations A contract is either oral or written all kinds of rules to dictate when it needs to be written down to be valid o In theory there are situations where an oral contract can be enforceable but in practice it is harder to prove o The statue of frauds there are certain types of contracts that need to be written down and signed Deals with common law contracts Most people write down their contracts regardless because they want to avoid confusion mistakes and misunderstanding If you can be an astute business person like the CEO of ticketmaster you can use contracts to lead to long term competitive advantage Contracts are at the center of creating a market base Contracts will typically be a lot of pages because there are several promises parties are making to each other o Ex one page may be about time another may be about competition non compete another term will be benefits another will be salary etc o Contracts are planning documents that basically set up how you are going to arrange your affairs over a period of time When you walk into a store you are basically participating in a contract By having goods on display with prices a store promises to sell specific items for that price and customers implicitly promise to pay for items they want to buy Don t need pages and documents for this in other cases you do need business planning documents that express important terms o The more meaningful a contract is the more likely youll have careful drafting of the contract Enforceable contract terms will either work in your favor or against you o Contract terms are never neutral o Whoever is writing the contract will already have thought about what these terms mean and why they are there Ex its typically the employer who writes the contract up some things will benefit the company and others will not In order to induce your promises to fulfill your job they need to promise to pay you o The terms will always have some positive and negative value Ex a big negative for you when signing an employment contract is the non compete where the salary would be a positive o Contracts are the vehicle for creating value in a capitalist market economy Contracts mean the art of negotiating o Whoever first drafts the contract has already negotiated their best case scenario because they wrote the terms they are the master of the offer Made the language reflect their best scenario already and they want you to basically accept their best scenario The art of negotiating is how do I maximize my own value Contracts are best understood as a bundle of separate clauses o Each clause should be negotiated separately Different paragraphs are called clauses o Each word should be read Common Law on Vagueness Vagueness with regards to essential contract terms identity of either party price delivery description of the items may lead a judge to hold that the contract lacked a meeting of the minds o Need three things for a common law contract Valid offer Ex an employers employment contract is a valid offer Consideration each side makes a promise to each other that is something of value that they don t have to give up Acceptance Ex you signing the contract or accepting an oral contract o Ex if salary were left out of an employment contract one party could ultimately argue that the contract is unenforceable and the courts would most likely agree Another reason why contracts are often so detailed and long o One of the parties will be injured by contract vagueness Either the court deciding the contract is unenforceable thus ending a deal or the other party who has to abide to a vague contract Contracts always have some kind of title at the top that indicate why the parties want to enter into this legally binding relationship Ex of a confidentiality page from a contract Basically to cover trade secrets when people reach a top level in a company o Kind of like a contract within a contract o Non solicitation confidentiality and intellectual property agreement that is attached to an employment contract o Good contracts are drafted in ways that are very logical and clear o Recitals start out as whereas are guarantees the parties are making or background information the parties are entering into Statements of facts to give a broader context of what these promises are going to mean later o Ex In the starwood contract Human capital they don t want you inducing other executives to go with you if you leave That is called poaching Under clause 1 you may not be soliciting someone but can be considered indirect soliciting But if you leave the company without really saying anything and they join you on their own its totally fine there is no liability Common Law Contract Elements Very famous case where a rich uncle promises his young nephew if you promise not to drink swear chew tabacco until your 21 years old I promise to give you 5000 a unilateral contract can only be accepted by either doing something or not doing something Nephew accepts once he turns 21 and had followed the contract In contrast a bilateral contract Ex employment contract is offer and acceptance at the same time Each side needs to give up something of value a promise in exchange for a promise a promise in exchange for inaction or forebarence opposite of action not doing something Need all three of these to be
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