California Injury Attorney Blog

To be legally binding, a contract needs two essential components: 1) an agreement, and 2) consideration. Within the agreement and consideration lies an assortment of provisions that add to the legality of a contract. These include the offer, performance, terms, conditions, obligations, payment terms, liability, and default or breach of the contract.

The agreement component involves offers, counter-offers, and eventually what contract law calls the "meeting of the minds." An agreement can be either oral or written, depending upon the contract. If you hire a taxi to drive you to the airport, then it is an oral agreement that you will pay the driver a certain sum when you reach your destination. Contracts whose agreements must be in writing include real estate contracts and contracts that last more than a year. Every state has its own legal requirements and you should consult these requirements to find the specific regulations that pertain to your type of contract.

The agreement process involves one party offering terms and conditions that are either accepted or rejected by the other party. If the other party changes any term or condition of the offer, then the offer becomes a counter-offer. At this point, each party negotiates the terms and conditions of the offer until they have a meeting of the minds. This is when an agreement has been met and a contract can be drawn up.

Both parties must be competent enough to enter into the contractual agreement. They may not be minors (under 18 years of age), under the influence of drugs or alcohol, or of unsound mind. They also must have the legal power to enter into the agreement; this particularly pertains to people representing an outside interest, such as a company or third party. The main question becomes, "Do they have the legal power to carry out the terms of the agreement?"

For an agreement to be legal and binding, it must have some form of consideration. This means that all parties involved must receive consideration or something of value. Otherwise, it is considered a gift rather than a contract. The promise of a gift is not necessarily binding, depending upon the circumstances. Usually consideration involves one party giving something such as a product or service, and in exchange the second party gives some form of monetary compensation.

The consideration component of the contract brings up several other provisions that should be addressed. These provisions include:

•Obligations and Conditions of the Contract -- what each party needs to do to fulfill the terms of the contract
•Performance -- how well each party performs the terms of the contract
•Payment Terms -- a schedule that specifies when all payments are to be made
•Liabilities -- defines the liability of each party in terms of the contract
•Breach of Contract -- what will happen should either party fail to fulfill their end of the agreement
When compiling the agreement and consideration of a contract, the agreement must be clear as to what is specifically expected of each of the contracting parties. An ambiguity or confusion in any part of the contract can lead to problems when trying to enforce the provisions of the contract.

Although not legally required, each contract should contain several provisions known as "boilerplate" provisions. These include:

•Arbitration Clause -- makes allowances so that disputes are handled by an independent arbitrator
•Entire Agreement Clause -- states that what is written in the contract is what the agreements and conditions of the contact are, and no previous agreements or conditions are applicable
•Force Majeure Clause -- states that should something happens beyond the control of either party (such as a tornado destroying a house while it is still in escrow), then the contract is no longer valid.

Continue reading "What Are the Essential Elements That Make Up A Valid Contract?" »

A partnership agreement is the document which governs how a partnership is managed and controlled (much like the bylaws of a corporation or the LLC operating agreement for a limited liability company). While you do not need to prepare a partnership agreement prior to setting up your partnership, it is highly advisable that you do so. says California Business Attorney Steven C. Peck.

First, it allows you to clearly define details about your partnership, which can help avoid trouble down the road. In addition, it will allow you to avoid any of the state's default rules about partnership operation that you may not like, so you can set your partnership up to be operated exactly as you want Los Angeles Business Lawyer Steven C. Peck suggests.

Partnership agreements do not have to be overly complicated, in terms of what goes in them. A partnership agreement should simply contain all of the major details about the partnership's ownership and management - what percentage of ownership each partner has, what percentage of control each partner has, what percentage of profits each partner is entitled to, if and/or when any meetings are to be held, etc. You should also include some of the boilerplate provisions that appear in many contracts, principally among these being what happens if there is a dispute or conflict between the partners.

Continue reading "What is a Partnership Agreement?" »

California is known as a "title theory state," which means that title to a property remains in trust until the loan is paid in full. Once a buyer fulfills his promise to pay the mortgage loan, the title transfers to his hands. When a homeowner is unable to meet his mortgage obligation, foreclosure begins. Foreclosure is the process in which the rights to a property are taken back from the homeowner and the property is sold to satisfy any unpaid mortgages and liens.

How Soon Do Foreclosure Proceedings Begin?
The early steps in foreclosure begin when your first payment is missed.

Can Only My Mortgage Lender Foreclose On My Property?
Your mortgage holder, other lien holders, or anyone who has a vested interest in your property due to money you have borrowed using the home as collateral can foreclose.

How Will I Know My Property Is Being Foreclosed On?
A Notice of Default will be recorded at the County Recorders Office in the county where your property is located and you will be notified by regular or certified mail.

What Is The Time line After The Notice of Default Is Filed?
In California, it is normally 90 days, plus 20 to 25 days until publication. This is time you should use to work with your lender to come up with a solution that halts the foreclosure process. The lender doesn't want to have your home on his books and you likely don't want to lose it, so it benefits everyone for you to talk to him directly to learn about options.

How Do I Stop The Foreclosure Sale?
The obvious way to stop a foreclosure is to bring your mortgage payments current, along with any fees you owe. If you're unable to do that, ask the lender to modify your payments, possibly adding the late payments on to the back of the loan. If your credit is strong, you may consider refinancing your home to a more manageable payment. Other options include selling your home and filing for bankruptcy.

How Would Bankruptcy Help Me?
In California, bankruptcy will stop the foreclosure proceedings, giving you time to work a plan out through the courts.

Continue reading "Some Foreclosure Questions In California?" »

A franchise is where a company obtains a license from another established business. This license allows the company to do business in association with the established company, using its business methods, trademarks and other resources indicates Los Angeles Business Attorney Steven C. Peck.

Typical examples of franchises include fast food restaurants and realtors offices. For example, while there may be multiple realtor offices across the county known as Century 21 realty, the individual offices are generally separately owned and operated, and simply have a franchise agreement with Century 21 (in other words, they are not all part of a chain, like Wal-Mart) says California Business Law Lawyer Steven C. Peck.

In addition, franchising can also include a situation where a company sells goods which come from the franchisor or offers services controlled by the franchisor, using the franchisor's trademark. The franchisor generally exercises some control over how the individual franchising business operates itself. Typical examples of this type of franchise include gas stations and car dealerships.

Continue reading "What Is a Franchise?" »

The most common method for getting out of a lease obligation is to sublease the space to another tenant. In order to sublease the space, however, your lease document must have a clause allowing for it. But beware, subleasing does not relieve the original tenant of obligation in the event that the subtenant defaults or otherwise violates the sublease terms. And landlords usually require the right to approve the subtenant based on reasonable terms says California ?Business Lawyer Steven C. Peck.

Another common method for relieving rental obligations is to buy out of the lease. This method requires the tenant to pay a negotiated lump sum to the landlord. This sum is calculated by discounting the future value of lease payments and then recapturing the unamortized portion of commissions paid as well as the value of tenant improvements. The buyout price is most often significantly less than the total of the remaining payments on the lease. Buyouts protect tenants by ending liability for the lease. For landlords, buyouts cover the sometimes significant vacancy costs during the time needed to find a new tenant.

Continue reading "How To Get Out of A Business Lease Obligation?" »

If you've never leased a vehicle before, the world of leasing may seem confusing. Leasing is a bit like renting a car long term, except that when the lease is up, you have a couple of options besides just returning the car to the dealership where you leased it.

Leasing a company car is a great option for cash-strapped businesses that don't have the money upfront to buy a vehicle. Leases are typically calculated on the amount by which the vehicle's value is expected to decrease during the lease period, so down payments and monthly lease payments are lower than you would pay if you bought a company car. A car that holds its resale value better will cost less to lease, as it loses less value over the lease term.

Be sure to compare any lease you're offered with others on the market before you sign a contract. Typically, a lease commits you to making payments on the car for three years, but other terms may be available says California Business Lawyer Steven C. Peck.

The following are other key factors to look at in a lease agreement:

•Capitalized cost: This is the lease price. You want to negotiate down the "cap cost" so it's significantly less than the manufacturer's retail price for the vehicle.
•Cap cost reductions: Be on the lookout for anything that might reduce your cap cost, such as factory rebates, dealer incentives, or the value of any trade-in vehicle you're offering the dealer.
•The money factor: This is lease-speak for the interest rate. The money factor will be stated as a decimal, which you multiply by 2,400 to get the interest rate. So a money factor of .00032 means an annual interest rate of 7.68 percent. The money factor may be influenced by a range of variables, including your lease length and your credit rating. Often the best money factors can be found in manufacturer-supported lease programs.
•Residual value: This is the car's value at the end of the lease. Unlike in car buying, where you won't know the car's worth three years from now until that day dawns, in leasing you agree upon a preset figure for what the car's value will be when the lease ends. You want a residual value set as low as possible because if the actual resale value at the end of the lease turns out to be more, you could buy the vehicle at the preset residual price and resell it for a profit or apply that equity to another lease or vehicle purchase. This is known as having positive equity at the end of the lease. If your vehicle turns out to be worth less on the open market than the residual value set in your lease, you're better off simply turning the car in and walking away.
Most dealerships offer lease agreements; but don't limit yourself to the dealer's offer. You can also lease a vehicle through an independent leasing broker. You can find an independent lease broker through the National Vehicle Leasing Association Web site.

Continue reading "Leasing Business Vehicles" »

A professional corporation is a special type of corporation which some state laws allow for that works like a limited liability partnership - that is, it's a corporation owned and operated by licensed professionals, such as attorneys, accountants or doctors. With a professional corporation, each owner/shareholder has limited liability with regard to any acts undertaken by other owners or the corporation itself. This is no different from the limited liability that applies to all other corporations. However, where there is a difference is that an owner/shareholder remains personally liable for any of their own misconduct. For example, if one owner commits malpractice and the business subject to some judgment as a result of this, that owner is personally liable to the extent the corporation cannot cover the judgment.

Continue reading "What Is A Professional Corporation and How Does It Work?" »

Where you are going to prepare a partnership agreement, you are free to set it up however you want, because they are fairly flexible. Essentially, you just want to include all of the relevant things about how your business is owned, controlled and operated. The basic things that should go into such a partnership agreement for a general partnership include:

1. Identification of the partnership name and any trade names the business will be using.

2. How long the partnership will last - this can be a determinate amount of time, like 10 years, or simply a statement that the partnership will continue indefinitely, until dissolved.

3. A statement of the partnership's purpose - this should be kept as broad as possible so that you have flexibility down the road, if you want to expand your partnership's business without having to worry about amending the agreement.

4. The contributions/investments (whether it's cash, services, or property) each of the partners will be making to the partnership.

5. How profits and losses are to be split and shared among the partners.

6. When profits can be drawn from the partnership and distributed to the partners - this can be monthly, yearly, any time the partners agree to, etc.

7. A detailed statement of any salaries being paid to any of the partners.

8. The authority the individual partners have to take actions which can bind the partnership and the other partners.

9. How the partnership is to be managed, whether any of the partners will hold specific/particular management responsibilities, how voting on management issues is to be handled, etc.

10. Whether partners are allowed to be involved in any business activities outside of the partnership and, if so, to what extent.

11. How partners can leave the partnership, whether they must offer the remaining partners an opportunity to buy them out, etc.

12. How partners can be expelled from the partnership by the other partners.

13. How new partners can be brought into the partnership.

14. How disputes between the partners are to be handled (i.e., mediation, arbitration, litigation in a particular state, etc.).

Continue reading "What Basic items Should Be Contained In a Partnership Agreement?" »

Breach of contract is a legal concept in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party's performance. If the party does not fulfill his contractual promise, or has given information to the other party that he will not perform his duty as mentioned in the contract or if by his action and conduct he seems to be unable to perform the contract, he is said to breach the contract.

Minor breaches:
A minor breach, a partial breach or an immaterial breach, occurs when the non-breaching party is unentitled to an order for performance of its obligations, but only to collect the actual amount of their damages. For example, suppose a homeowner hires a contractor to install new plumbing and insists that the pipes, which will ultimately be sealed behind the walls, be red. The contractor instead uses blue pipes that function just as well. Although the contractor breached the literal terms of the contract, the homeowner can only recover the amount of his damages. Generally, this means the difference in value between the red pipe and the blue pipe. Since the pipes are identical value, the difference is zero; therefore, there are no damages and the homeowner receives nothing.

Material breach:
A material breach is any failure to perform that permits the other party to the contract to either compel performance, or collect damages because of the breach. If the contractor in the above example had been instructed to use copper pipes, and instead used iron pipes which would not last as long as the copper pipes would have, the homeowner can recover the cost of actually correcting the breach - taking out the iron pipes and replacing them with copper pipes.

As with nearly everything in the law, there are exceptions to this. Legal scholars and courts often state that the owner of a house whose pipes are not the specified grade or quality (a typical hypothetical example) will not be able to recover the cost of replacing the pipes for the following reasons:

1. Economic waste. The law does not favor tearing down or destroying something that is valuable (almost anything with value is "valuable"). In this case, significant destruction of the house would be required to completely replace the pipes, and so the law is hesitant to enforce damages of that nature.[citation needed]

2. Pricing in. In most cases of breach, a party to the contract simply fails to perform one or more terms. In those cases, the breaching party should have already considered the cost to perform those terms and thus "keeps" that cost when they do not perform. That party should not be entitled to keep that savings. However, in the pipe example the contractor never considered the cost of tearing down a house to fix the pipes, and so it is not reasonable to expect them to pay damages of that nature.[citation needed]

The result is that most homeowners will not collect damages that will compensate them for replacing the pipe, but rather collect damages that compensate them for the loss of value in the house. For example, say the house is worth $125,000 with copper and $120,000 with iron pipes. The homeowner would be able to collect the $5,000 difference, and nothing more.

The Restatement (Second) of Contracts lists the following criteria to determine whether a specific failure constitutes a breach:

In determining whether a failure to render or to offer performance is material, the following circumstances are significant: (a) the extent to which the injured party will be deprived of the benefit which he reasonably expected; (b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived; (c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture; (d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances; (e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.

Fundamental breach:
A fundamental breach (or repudiatory breach) is a breach so fundamental that it permits the aggrieved party to terminate performance of the contract, in addition to entitling that party to sue for damages.

Anticipatory breach:
A breach by anticipatory repudiation (or simply anticipatory breach) is an unequivocal indication that the party will not perform when performance is due, or a situation in which future non-performance is inevitable. An anticipatory breach gives the non-breaching party the option to treat such a breach as immediate, and, if repudiatory, to terminate the contract and sue for damages (without waiting for the breach to actually take place).

Limits on Remedies and Damages:
Typically, the judicial remedy for breach of contract is monetary damages. See damages. Where the failure to perform cannot be adequately redressed by money damage, the court may enter an equity decree awarding an injunction or specific performance.

The aggrieved person has a duty to mitigate or reduce damages by reasonable means. Liquidated Damages may be limited to a specific amount. In the United States, punitive damages are generally not awarded for breach of contract but may be awarded for other causes of action in a lawsuit. Limitation of Liability (Exculpatory) clauses. [Private agreement is permissible.] [Invalid when public interest is involved and there is willful conduct or gross negligence.]

Continue reading "The Breach Of Contract: The Inability Or Failure To Fulfill The Promise" »

There are times when a Business partner may decide that it is time to leave the partnership. Many times the Business partnership agreement will include details about how this is handled. The agreement may require that the Business partner first offer the remaining Business partners a buyout option, allowing them an opportunity to purchase his or her share/interest in the partnership before he or she tries to sell that share to some third-party says Woodland Hills, California Business Attorney Steven C. Peck.

If the Business partnership agreement is silent on the issue of what happens when a partner leaves, most states' partnership laws cover the issue. You should be very careful in this situation because the laws differ from state to state - however, in many states, the law says that the partnership automatically ends when any partner leaves.

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A business is built on a series of interwoven agreements and relationships. Small business owners often trust that their personal relationships are strong enough to ensure that agreements will be honored. But a well-written contract not only helps enforce these agreements, it can also strengthen vital relationships.

What is a contract?

In simple terms, a contract is a legally enforceable agreement. The precise conditions that create an enforceable contract vary from state to state. But, a few basic elements must be present.

First, a contract must be something both parties have agreed to. Typically, this occurs when one party makes an offer or a counter offer, and the other party accepts that offer. Second, both parties must exchange something of value. A promise to do something, or not to do something, is sufficient. Third, the terms of the agreement must be sufficiently definite for a court to determine what the parties have agreed to.

Contracts can be written or oral, formal or informal. The best contracts are ones that explain what each party has agreed to do in plain language.

Why written contracts?

While oral contracts are enforceable, there are many reasons not to rely on them. First, every state requires that certain types of contracts be in writing to be enforceable. These requirements vary from state to state, and include both the obvious (contracts for the purchase of land) and the innocuous (contracts guaranteeing the debts of a third party). If you're dealing with an important agreement, it's best to make sure you've complied with the law by getting something signed and in writing.

Second, while it might seem counterintuitive, a written contract actually helps parties stay out of court. Most business disputes arise out of a disagreement about what the parties agreed to do, not one party simply refusing to do what it promised. Taking time to put an agreement in writing will help avoid misunderstandings that can lead to disputes and lawsuits.

What should be in a written contract?

Each contract is as unique as the underlying business relationship. However, every contract should cover a few key points. A contract for the purchase or sale of goods should usually contain terms like the parties involved, the time and place of delivery, the time and method of payment, the product description and the unit price. Cliff Ennico, small business author and lawyer, suggests business owners make sure certain elements are clear in their contracts: who is doing what and when; what are parties not going to do; how much is being charged; and, when payment is due.

Continue reading "A Well Written Contract Will Strenghten and Reinforce Business Relationships" »

There are no formal procedure requirements which sole proprietorships have to follow, which is why they are these easiest type of business to run. Partnerships and LLCs have some limited formalities they have to file, as mandated by state law, although there are generally no requirements for things like annual meetings. Most states have very strict formalities which corporations must follow, including the fact that they generally must hold annual meetings of their shareholders and directors.

Continue reading "What Business Types Have To Follow Strict Procedural Requirements?" »

Partners in a partnership are fiduciaries to each other. This relationship means that they owe each other, and the business, certain basic duties. For example, they must be truthful to each other regarding anything relating to the partnership itself, property owned by the partnership and the other partners. Thus, it would be a violation of these duties if a partner embezzled money from the business, misused or abused property belonging to the partnership, or tried to take advantage of another partner. Related to these fiduciary duties, the partners also have a duty of loyalty, which means that they must remain loyal to the partnership. Thus, a partner cannot do business with another company which is at odds with the partnership, nor can he or she conduct any side business which places them in competition with the business of the partnership itself.

Continue reading "Partners In a Business Partnership Are Fiduciaries to One Another" »

Shareholder agreements, also known as stockholder agreements, are important for many businesses but particularly for closely held businesses and family businesses. A shareholder agreement is negotiated and executed before any business problems develop. Shareholder agreements provide businesses with a roadmap of how to act in certain situations. Also, in privately held companies, some shareholder agreements may be kept confidential among the stockholders, unlike the corporate governance documents that must be filed with the state's Secretary of State's office.
Stock Ownership Provisions of Shareholder Agreements
The most important issues that are addressed by shareholder agreements are those that address stock ownership. A shareholder agreement can serve two important purposes with regard to stock ownership- it can control when a stock is sold and to whom. For example, in a closely held or family business a shareholder agreement can limit the sale of stock to third parties and it can define triggering events that require a stockholder to sell his or her shares to the other existing shareholders. This is important for a closely held business that only wants specific shareholders and does not want to extend ownership rights to others.
However, some closely knit businesses and family businesses may not want to prevent the transfer of stock to third parties in every situation. Therefore, they may require that an existing stock owner offer other existing stock owners the right of first refusal when selling stock. If the existing owners do not want to purchase the stock then, pursuant to the shareholder agreement, it may be sold to a third party.
A shareholder agreement can also limit a stockholder's actions after his or her shares are sold. Many shareholder agreements include no competition clauses that prevent a stockholder who sells his or her shares from directly competing with the business for a certain amount of time. In order to be enforceable, this provision must be carefully written so as to allow the selling shareholder a reasonable opportunity to make a living and not unduly restrict economic competition.
Other Provisions of Shareholder Agreements
Shareholder agreements can also contain other important provisions related to the operation of a business. For example, a shareholder agreement can:
· Explain how individual stockholders will be elected to the Board of Directors;
· Require a "super majority" vote among stockholders for certain important votes;
· Describe how future capital contributions will be made to the business and how these contributions may affect ownership rights;
· Create procedures to follow when there is a "tie" vote and the shareholders do not have a majority opinion; and
· Establish conflict resolution procedures to follow if disputes arise among stockholders. This could include mandatory mediation and/or arbitration, for example.
Like all businesses, closely held and family businesses want their businesses to succeed. However, unlike other businesses, they have additional concerns and must take the necessary steps to protect their business from outside control and to protect the rights of different family members. For these reasons, shareholder agreements are particularly important to closely held and family businesses.

An Internal Revenue Service watchdog warned recently that the paperwork burdens on small businesses may outweigh the benefit of tax collections generated as part of the new health-care law.

Starting in 2012, about 40 million businesses, charities and other entities will be required to report to the IRS payments they make to suppliers and service providers, the IRS Taxpayer Advocate Service said in its midyear report to Congress says California Business Attorney Steven C. Peck.

The reporting regime is aimed at giving the IRS more information to help it collect taxes from the vendors. But the report said it could disrupt commerce and that IRS systems might not be equipped to make much use of the information anyway.

Businesses are already required to report payments to noncorporate service providers that exceed $600 in a given year.

The health-care law expanded that to cover incorporated service providers, and also vendors of goods. That means that a self-employed person who pays the same vendor more than $600 for office supplies, equipment or consulting services in the same year must now generate a 1099 form for that vendor and send it to the IRS.

The IRS has announced that businesses wouldn't have to report payments made by credit card, as those payments will be picked up by a separate reporting regime.

That isn't much comfort, as many transactions within a single industry -- like the payments between manufacturers and distributor -- are handled by check.

The Taxpayers advocate, which represents a variety of industries from electricians to toy makers, has fought the new requirements.

The rules could well push more small businesses toward making payments by credit card in order to avoid the extra paperwork, "The credit-card companies get a major windfall out of this."

For instance, the law requires that the vendor provide its business customers with a taxpayer identification number, which the customer must then include on the 1099 form. If the vendor doesn't provide an ID number, the business is required to back-up withhold, on behalf of the IRS, 28% of the purchase price.

"A vendor may simply refuse to sell goods to any purchaser that refuses to pay the full purchase price. Such an outcome could significantly impair the normal course of commerce,"

In addition, she said large company vendors will have an advantage over small firms because they may offer to keep track of payments for their customers to help meet the IRS requirement.

The new reporting requirements were included in the health-care bill to help offset the cost of new health-insurance subsidies. They were estimated to raise $17 billion for government coffers over the next 10 years.

The information-reporting requirement is one of two main areas of concern on which the Taxpayer Advocate said it will focus during the coming year.

Writen by Martin Vaughan at martin.vaughan@dowjones.com
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