Contract Law and the UCC

Contract law

• Pertains to laws regarding contracts, or agreements between parties
• Some of the oldest laws, originating in English common law

Uniform Commercial Code (UCC)

• Includes a set of rules dealing with contracts for the sale of goods
• Used by most states
• Special legislation exists in other areas like extending credit, home solicitation, automated payments, home improvements, and health studios

Elements of a Contract

• A contract involves mutual consent with an offer and acceptance
• Each party of the contract gives up something for consideration
• A bilateral contract involves both parties making promises
• No promise in return equals a gift
• Capable parties must be of sound mind and mental capacity
• Exceptions to capable parties includes:
  • Minors purchasing life necessities
  • Emancipated minors
• Lack of mental capacity need not be permanent
• Rescinding is to undo a contract
• It is not enforceable if the subject matter of the contract is illegal, such as for gambling when gambling is illegal

Statute of Frauds

• Addresses types of contracts required to be in writing
  • Contracts that can't be performed in one year or in the lifetime of the promisor
  • Sale of real property
  • Contemplation of marriage

Legal Principles

• Special Legislative Requirements deals with consumer rights
• Parol Evidence Rule limits evidence that can be used if a dispute arises and deals with contracts when significant changes have been made
• Quasi Contract (aka Implied-in law contracts) allows the court to treat a certain situation as if it were a contract even if one element is missing and is usually used when one party is unjustly benefited
• Promissory Estoppel/Detrimental Reliance deals with promising a gift of money to another person or organization
  • If the promised organization made plans, spent money and is counting on the gift or is negatively affected, this could be enforceable

Breach of Contract

• Is a failure to perform promises or failure to perform promises satisfactorily

Remedies for Contracts

• Monetary compensation as the most common remedy for any loss sustained
• A court order can enforce specific performance
• Restitution mandates the return consideration that was given
• Arbitration involves an out-of-court hearing by a neutral party

The Uniform Commercial Code addresses

• Issues with implied warranty of merchantability
• Implied warranty of fitness for a particular use
• Implied terms not clearly stated in the contract

Assignment vs Delegation

• An assignment is to transfer rights
  • It is most common that if a party in the contract is not paid, the matter can be turned over to a collection agency
• Delegation is to transfer obligations under a contract, but is subject to restrictions
  • It is not possible to delegate personal services if it changes the basic agreement and the original promisor remains liable

Ownership Interests in Real Property

• Originate in early English Common Law
• Includes real property and fee simple
• Fee Simple is outright ownership of land, and the owner may do anything they wish as long as they comply with zoning & established easement laws
• A life estate is the right to use property during a lifetime
• Joint Tenancy:
  • Is co-ownership of property, based on survivorship
  • If one tenant dies, the other(s) inherit the property and generally, it can't be changed by a will
• Tenants in Common:
  • Is co-ownership of property, not based on survivorship
  • If one tenant dies, that person's share passes to their heir

Community Property

• Can leave share to anyone in a will if you have community property
• With no will, it goes to surviving spouse
• Tenants by the entirety is recognized in non-community states

Deeds

• Is a document that describes the property and lists the owners
• Includes:
  • Recorded in the county where property is located as a notice of ownership to protect listed owners
  • Prevents transferring ownership more than once and can be used as evidence

Transfer of Ownership

• Warranty deed includes the grantor guarantees title to the property
• Grant deed includes the grantor represents that property has not been previously transferred
• Quitclaim deed includes the grantors makes no representation

Non-Ownership Interests in Real Property

• An Easement is the limited right to use a portion of another's property
• A Mortgage is also known as a lien

Foreclosure

• Is a legal proceeding involving the sale of mortgaged property that happens when the owner fails to pay the debt
• A Deed of Trust gives notice of lien or mortgage, such that multiple creditors get paid off according to loan date

Tenancy

• Addresses the right to use another's property for a limited time
• Includes college dorms, rental apartments, condo rental, and business leases

Landlord/Tenant Law

• Month-to-month is permission to use for an indefinite period of time that usually requires a 30-day notice from either party
• A lease has a specified period of time
  • The Statute of Frauds requires over a year in written agreements otherwise there is no requirement
• Local terms are subject to ordinances, anti-discrimination laws, and local government
• The U.S. Department of Housing and Urban Development applies

Copyrights Protection

• Applies to for literary, dramatic, musical, and artistic original work like computer software, movies, plays, records, and CDs, whether published or unpublished
• Is legislated by the 1976 Copyright Act and gives exclusive rights
• It has limitations for "fair use" and "reselling"
• Works not fixed in a tangible form, such as speeches or performances not written or recorded, are not protected
• Titles, names, ideas, procedures, and works consisting entirely of information that is common property, like height/weight charts, lists or tables taken from public documents, are not protected
• A license agreement allows the non-author to use the product with limitations such as software, textbooks, and books
• One must register with the United States Copyright Office via paperwork and fee
  • No lawsuit until copyright is registered and to check out www.copyright.gov for existing copyrights
• Protection lasts from the moment of creation to 70 years after the author's life
  • Lawsuits for copyright infringement are more prevalent

Patents

• Patents used as a copyright, but only for inventors, eliminates the unauthorized use of product or process under federal law
• Patents registered through the U.S. Patent and Trademark Office for a process, manufacture, or composition of matter
• Patents must have a “useful” process and only the inventor may apply with a written description, drawing, and fee (oath for obtaining a patent)
• Patents last 20 years from application with maintenance fees
• Not patentable subject matter includes laws of nature, physical phenomena, and abstract ideas or if there was prior publication, use, or patent, even if by the inventor
• Items must be new, and if subject matter previously patented, it must be sufficiently different

Trademarks

• Trademarks as words, phrases, symbols, or designs that identify or distinguish goods or services from others
• TM protection exists under both federal and state laws
• Trademarks last indefinitely if the owner continues to use it to identify its goods or services and federal trademark registration is renewable every 10 years

Trade Secrets

• Trade secrets are governed by state law and are legislated under the Uniform Trade Secret Act (adopted by many states)
• Trade secrets include information, formulas, patterns, compilation, program, and customer lists
• No registration process is needed, but disgruntled employees are a risk

Creation of Employment Contracts

• Employment is a legal relationship based on a contract
• Parties in an employment contract are the employer and the employee
• Employers are the party who pays
• Employees are the party who does the work
• Employment exists when an employer contracts to pay an employee to do work under the employer's supervision and control
• Employment is different from independent contracting such as when a homeowner agrees to pay a roofer without supervising the work

Express Agreements

• Employment contracts can be derived from Express Agreements
• Employment agreements can be oral or written and used in sports, entertainment, top level managers, and union members
• Express agreements typically describes the elements of the employment relationship:
  • Includes compensation
  • Fringe benefits
  • Amount of work time
• A party who violates the employment contract is liable for breach

Implied Agreements

• Involves employment-at-will
  • An employee can be discharged at any time because there is no agreement about length of time
  • An employee can also leave the job at any time without notice

Terms Imposed by Law

• Some State and Federal laws provide many terms for a contact
• Includes a minimum wage
• Employees have duties such as obedience, abiding by reasonable orders and rules of the employer, even if not expressed
• Employees must have the reasonable skill to posses the required skill and knowledge to perform the job
• Employees must have loyalty and honesty, and look out for the employer's best interest
• An employer is justified in discharging an employee who fails to perform assigned duties at the prescribed time and in a prescribed manner if they do not have reasonable performance

Employer Duties

• Provide employees with reasonable treatment and safe working conditions
• Safe working conditions entitle employees to have safe tools, equipment, and machinery
• Under the Fair Labor Standards Act, employers must deliver the minimum wage and maximum hours for all employees
• The standard is 40 hours per week at regular pay (with no daily minimum)
  • If more than 40 hours are worked, overtime must be paid at 1 1/2 times the regular rate
  • Minimum wage and overtime does not apply to executives, administrators, and professional workers
• Payroll deductions are money money deducted from the employee's paycheck for certain government programs
  • It is for federal taxes, FICA, state taxes and local taxes
• Employees have duties to Minors (Child labor laws)
• Child labor laws are different from state to state that refers to people under 18
• All laws are based upon education during a person's early years and to prevent work that can be harmful
• Child labor takes jobs away from adults
• The states usually specify the minimum age for employment during school
• 48 hours is a typical maximum hours of work and school in a week
• Most states have laws about number of days worked, prohibit night work hours and minimum grade in school
• The Fair Labor Standards Act sets minimum protection for young workers
• It is illegal for people under 14 to work, except in entertainment and agriculture industries
• Employers have a Military Service basic duty under the Military Selective Service Extension Act 1950 to re-hire an employee if honorably discharged from the military
• These laws apply to people who have been drafted, enlisted, or called to active duty and veterans must still be able to perform the work
• Employers provide voting rights and more than half of the states provide time for employees to vote in primary and general elections

Termination of Employment Contracts

• Are based upon performance and if performance is not adequate, the person is released from their duties
• Employment Contracts can be Terminable at will, meaning either the employer or employee can terminate the relationship
• Wrongful Termination is discharging someone based on race, religion, gender, age, disability, pregnancy, Veteran Status and/or national origin
• Federal Law also prohibits employers from terminating employees for engaging in union activities
• Employees have a Right to Unemployment Compensation for being Discharged without cause – when the discharge was not the employee's conduct
• Benefits are not provided if the employee is discharged for violating an employment obligation
• Unemployment compensation if a government payout to workers who have lost their job, when it is no fault of their own
• It is not available to workers who voluntarily quit, go on strike, or refuse similar substitute work