From Start to Finish: The Legal Aspects of Business Contracts in California 

Posted by: kevensteinberg
Category: Blog
Lawyers reviewing documents

Business contracts are an essential component of all business relationships. Poorly drafted contracts may cause parties to initiate disputes which can waste time and money. If you are in a business relationship with another business entity, then you should learn the value of understanding the legal aspects of business contracts. Our attorneys work toward helping clients meet their goals by drafting business contracts which are thorough, detailed, and precise. 

Common Types of Business Contracts in California 

The different types of business contracts have different functions among the parties who contract with each other in California. The following are some of the most common types of business contracts in use in the State of California: 

  • Government contracts 
  • Business to business contracts 
  • Real estate contracts 
  • Independent contractor agreements 
  • Service agreements 
  • Memorandum of understandings 
  • Non-disclosure agreement 
  • Partnership agreement 
  • Employment contracts 

Although this is not an exhaustive list of the types of contracts you may encounter in California, it is a fairly comprehensive collection of the most popular agreements among businesses in California. 

Services Provided By Contract Lawyers 

Attorneys who specialize in contractual work perform many different types of services for clients. The following are some of the most common activities contractual attorneys engage in during their careers: 

  • Contract review 
  • Negotiating contract
  • Drafting contracts 
  • Breach of contract 

Understanding the differences between these tasks can help clients feel more comfortable with letting a contractual attorney improve their interactions with business partners. Contract dispute litigation is often contentious, and the parties need to have skilled contractual lawyers on their side to protect their rights. If you enter contractual litigation without an experienced attorney on your side you may have your legal claims dismissed. You do not want to inadvertently harm your case because you chose not to seek legal representation. Speaking to an attorney will help you feel more secure regarding your legal rights. 

Contract Drafting and Interpretation

Contractual attorneys focus on drafting contracts with the understanding that a judge may need to interpret the operative provisions in the contract. It is difficult for a layperson to draft a contract in such a manner that it will be able to benefit the client. Some individuals use boilerplate contract forms for their business operations, but this is a mistake which can cause problems in the future. 

Lawyers need to understand how to focus on the most relevant aspects of a business contract. The parties must have mental capacity and the parties must exchange consideration. Also, a contract cannot be valid if it concerns illegal subject matter or illegal conduct. Mutual agreement, also known as “a meeting of the minds,” is also important to contract drafting. 

Attorneys understand the importance of getting communications in writing so they can be referred to and analyzed at a later point in time. Also, contractual attorneys can review contracts to determine if a business partner is attempting to deceive a contracting party. 

Attempting To Get Out Of a Business Contract 

All parties need to be careful when entering legally binding contracts in California. Depending on who drafted the contract, you may not be able to cancel the contract. A business contract lawyer can provide you with the expertise you need to determine your options for leaving a business relationship. A contract may be void if it was never valid at the outset of contract formation. 

The parties may cancel a contract if the contract terms are impossible to fulfill. If the contract was based on mistake, misrepresentation, or fraud, then the parties may be permitted to get out of performing under the contract. Some contracts have escape clauses, and these provisions can give the parties more freedom if they wish to end a contractual relationship. 

Rescission is the legal term which refers to the mutual cancellation of a contract. Both parties decide to end a contract, and this rescission is a formal agreement in which the parties relinquish their rights under the former contract. If you have more questions about rescinding a contract then you should speak to a knowledgeable business contract attorney in California. 

Alternative Dispute Resolution 

Alternative dispute resolution is one of the most important aspects of a civil lawsuit. The most common types of alternative dispute resolution are settlement negotiation, mediation, and arbitration. Mediation is conducted by a neutral third party who is typically a former judge or attorney. Mediators are trained to assist the parties with their dispute and to help the parties reach a mutually agreeable resolution to their legal dispute. 

Arbitration may be binding or non-binding. During binding arbitration the arbitrator has the power to decide a dispute and force the other party to comply. It is imperative that you have legal counsel if you are ordered to participate in mediation or arbitration. Settlement negotiations may occur any time during a civil lawsuit, and this is one of the most common methods used to end contract disputes. 

Alternative dispute resolution can help businesses save time because they do not have to pay the costs of litigation. A civil lawsuit can take time to resolve, and trials are often stressful, expensive, and emotionally distressing. A contractual attorney can help you understand which form of alternative dispute resolution is most likely to help your case. 

Third-Parties and Business Contracts in California 

The majority of state contract principles arose from the common law. Third-party rights are focused on assignment of rights and delegation of duties. The parties may be permitted to assign the rights they have under a contract to another party. Also, parties can delegate duties, and this means another party will be required to perform according to the terms of the agreement. 

These third-party rights and duties can cause extremely complex litigation to arise. Therefore, if you want to learn more about third-party rights and business contracts, then you should reach out to a California business law attorney today. You can speak to a knowledgeable, skilled, and experienced business contracts lawyer who can provide you with exceptional legal representation. 

Employment Contracts and Avoiding Litigation 

Employment contracts are essential for a business of any size. Litigation regarding employment matters is financially burdensome and takes up valuable time. Therefore, one of the best things any business owner can do is reach out to a business contracts attorney to ensure that the provisions within their employment contracts are as definite and enforceable as possible. 

Arbitration clauses are often inserted into employment contracts to ensure that arbitration will be the primary form of dispute resolution regarding employees and employers. A business contracts attorney can assist you with drafting employment contracts which will reduce the likelihood that you will have to face civil litigation regarding employment law matters. 

Many attorneys who work in employment are skilled at scrutinizing the contents of employment contracts. Therefore, if you are an employer, then you need to be prepared to analyze every provision inside the employment contract which is in effect between yourself and your employees. Understanding how to protect your business and your personal assets will give you more time and energy to focus on developing your business. 

Business Contract May Be Concerned With Different Subject Matter Areas

Business contracts need to be comprehensive, detailed, and thorough. The contract terms should be explicitly set forth in the agreement. It is possible for business contracts to concern different subject matter areas, including financial services, franchises, manufacturing, and information technology. 

The following fields are often related to business contracts and their interpretation: 

  • Private placements 
  • Corporate governance 
  • Software licensing 
  • Strategic partnership agreements 
  • Volume purchase contracts
  • Research & development agreements
  • Licensing contracts 
  • Copyrights, trademarks, and patents 

Business contracts can protect your business assets and your professional relationships. Contract reviews can help you determine if you need to take action to initiate legal proceedings or prepare to defend a case against claims asserted by plaintiffs. 

Contract Formation in California 

A legally valid contract is an agreement between two or more parties which is enforceable by a court. Sometimes contracts are unenforceable, or void, but business contracts need to accord with common law principles and state statutory requirements. The elements of a valid contract are an offer, an acceptance of the offer, and consideration. These contract principles are judged according to an objective standard, and the parties may also reject offers and present counteroffers. 

Counteroffers are rejections, and the party receiving a counteroffer may reject it, accept it, or present a counteroffer. Contracts are generally divided into service contracts and contracts for the sale of goods. Article 2 of the Uniform Commercial Code covers contracts for the sale of goods. Different contract principles apply to contracts for services and contracts for the sale of goods. 

Limitations on Contracts in the State of California 

Contracting parties must adhere to specific limitations set forth by California state law. Contracts cannot be for an illegal purpose, and contracts cannot concern illegal subject matter. For example, a contract to buy or sell illegal drugs would not be enforceable in state or federal court. 

Contracts which are unconscionable may also be unenforceable in the State of California. One party should not have unbalanced bargaining power, or an unfair advantage, and the court will balance the equities between the parties depending on the facts and circumstances of the agreement between the contracting parties. 

Verbal Agreements in California 

Verbal agreements are enforceable in California, but limitations do apply to oral contracts. Contracts for the sale of goods worth $500 or more must be in writing to comply with the Statute of Frauds. Also, sales of real property and contracts which cannot be performed within one year must be in writing to be enforceable. Written contracts are favored by attorneys and other professionals because they are less ambiguous than oral contracts. 

If you enter into an oral contract with another party then you should be aware of the dangers inherent in a verbal agreement. No writing codifies the positions of the parties, and these contracts are often less formal than contracts in writing. 

The parties to a contract need to rely on their promises, and oral contracts are often disputed by one party. However, unlike written contracts, oral contracts have no objective existence. The parties may not be honest about the terms they agreed to at the time of contract formation, and courts may find it more difficult to enforce oral agreements when they are disputing the contents of the deal.

The Statute of Limitations for Breach of Contract Actions in California 

The statute of limitations for a breach of a written contract is four years. However, the statute of limitations for a breach of an oral contract is two years. If the breach of contract is related to misrepresentation, then the statute of limitations period does not begin to run until the injured party has knowledge of the fraudulent conduct. 

Adhering to the statute of limitations is necessary to assist you with litigating your claims. You cannot rest on your rights, and you must be prepared to investigate the facts of your case and consult with an attorney as soon as you believe a contract dispute has arisen. Being prepared is an essential component of any litigation involving business contracts. 

Retaining a business contracts lawyer will help you understand how to enforce your legal rights. However, you must ensure that you file your legal claims before the statute of limitations period expires. Losing your right to bring your claims means you are being deprived of the right to seek monetary compensation for your injuries. 

Contact Steinberg Law Today to Schedule a Free Consultation 

Learning about the legal aspects of business contracts can protect yourself, your investors, and your business partners. The more knowledge you possess regarding your legal rights, the more likely it is that your business ventures will be successful. If you are searching for business lawyers, contact Steinberg Law today to schedule a free consultation. Our team of legal professionals can give you valuable advice which you can use to conduct business in the State of California. 

Author: kevensteinberg