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Legally Binding Contract
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0:06
All right. Hello and welcome.
0:11
It's Friday.
0:15
Very excited for today. Happy to have you joining me today. We're going to talk about the exact steps that I take to create a legally binding contract now, there's going to be some parts of this. You're going to be like, that's boring.
0:32
But I think contracts are exciting. I think you're something that you should be excited about that this shouldn't be something that you are scared of or that you don't want to do because it really is one of the best parts of law, like, and we'll talk about that more in detail.
0:54
If you are new here, my name is Taylor Darcy from Think Legal, where I hope you create the business of your dreams. So welcome. I am happy you're here. If you're watching, I go live Monday through Friday, most days, except for holidays and at 11 right now, like this, like one minute ago. So please tune in live to get your questions answered and, uh, you know, just come and hang out. We'll have some music. We'll throw some fireworks up just in case you're
1:27
interested for exciting things. So if you have awesome things going on in your life, please, I love to hear them, especially from a business perspective.
1:37
I am here to help. That's my goal, my objective in doing these videos, because as I've said in past videos, my parents were carpet cleaners and there was in one particular she, they had a, uh, they would do commercial carpet and there was a motel that they used to do and they used to charge X. And then if spots came back, they'd come back and fix them. Well, it ended up that they were making literally no profit on this deal, but because of the contract that they'd
2:06
signed, that it was a bad contract and they didn't have exit clauses and all that stuff. And so that's why I became an attorney was to help businesses exactly like my parents. And so this is my opportunity to help you with your business, uh, at no cost for you. So great. Um, if also, uh, just as an FYI starting August 2nd and 3rd, I am moving offices. So you won't see me till August 4th. Just to give you a heads up, I've got to pack up my office and move it.
2:45
And I'm moving to a new suite in the same building. So it's not going to be terrible, but it'll take me a little bit to get set up. So I'm giving myself a couple of days to get ready. So, um, but I'll go live up until then. I also, and I've said this before, I've got jury duty on June 27th. No, wait, sorry. July. Oh, it's, it's Friday. My brain's just, just a little, you know, I'm a little tired.
3:14
Uh, June, July 27th, I've got jury duty and I will tell you how that goes. Hopefully on July 28th, if I don't get picked. If I do get picked, unfortunately I won't be able to go live for a while. Uh, at least this way anyway. So just keep that in mind that I may be here. I may not for those days, but I'm sure I will have awesome stories to talk about and to discuss in regards to law. If I'm picked just as an FYI attorneys don't get picked very often because.
3:46
The attorneys don't like us to be on the jury. Just so I'm not, I'm not too terribly hopeful that I'm going to get picked. It could happen though. I could happen. That would be interesting. So let's go ahead and get started.
4:20
All right. Welcome back.
4:23
So the very first thing that you need to think about when you are considering drafting a contract is what it is exactly that you want the contract to be for.
4:35
So there's, there's a, there's offer acceptance consideration, and we're going to talk about those, but I want you to think about very specifically what it is the contract is going to be for. Now verbal contracts are binding in certain instances and some they're not. So anything for real property, any type of service beyond a year or any type of good beyond $500 requires a contract in writing. Now, because of the nature of contracts and business, and this is very common.
5:09
Contracts don't always look like the formal written contract that you might think of there are like, for instance, of forms issues that go with. Whenever you're doing goods, those can be considered in writing and the acceptance factor that goes with it. So don't feel like that you have to. Uh, that it has to be some formal agreement that you, that you're stuck with right, or I don't want to say stuck with a formal, you know, 50 page agreement in order for it to be binding.
5:42
That's not true. It does not have to be that in depth.
5:46
But there needs to be a clear offer as a matter of point. An advertisement is a offer to negotiate. It is not considered a contract by, uh, by the courts, unless there are clear and definite terms in it that indicate that the, the, the unilateral party, the party that's offering it, um, is specific in their, in what they're offering enough for that a reasonable person would. To see that to be a contract. So, uh, yeah, it's an opportunity to negotiate.
6:20
Most advertisements are that way.
6:24
I don't know why I never clear my throat.
6:27
Uh, very rarely clear my throat. So I don't know why it is whenever I go live, I have to clear my throat, but anyway, I digress. So the next part of a contract is an acceptance. In other words, it needs to be clear that the other party accepted it. If it's unclear, then you run the risk of there not being, and this is the next one. What's called the meeting of the minds. And the simple version of it is you both have to agree on the terms. There was a old case about a ship and
6:57
long story short, there wasn't a meeting of the minds cause one person want mint one ship and the other person meant the other ship or so on and so forth. And so there wasn't a clear and definite. So part of drafting a contract is that you want to have clear and definite terms. And that's where the meeting of the minds come from. So it needs to be as reasonable as humanly possible that you mean the same thing.
7:25
Like I said, contract law doesn't have to be complicated. Attorneys make it more complicated than it has to be because we typically see how bad it can get. Okay. And so it's, it's this idea that you're going to be more protected with the well drafted attorney drafted contract typically than you are for a non attorney drafted contract, and I'm not dissing it. I'm simply saying, but it, but the legally binding nature of it doesn't change. Like a non attorney contract, uh, is
8:00
still legally binding, but they might find some of the provisions to be. Not so good. And for instance, I reviewed several years ago, a, uh, I think I mentioned this in one of my videos before, but a wedding photographer contract. And it was, you could tell the wedding photographer had actually drafted the contract as opposed to an attorney or someone else, because some of the clauses were so ridiculous that I just said, you know, this is indicative of the party
8:32
that's going to be doing it and I wouldn't, I wouldn't bother. Like I would not accept that contract because of that, because of how one sided the contract was, I'd find a new photographer if that were me. And I don't know what they ended up doing. They didn't tell me, but that was my official advice. And so the issue becomes when you create that contract, that's the first opportunity the other party has to see you don't make contracts to one sided.
9:00
And I see this happen more with people that aren't attorneys than I do with attorney contracts. Attorney contracts tend to be fairly equal. Even like I don't, when I draft a contract, I don't draft it to get the better of the other party. Now, am I going to draft it in favor of my client? Absolutely. I mean, that's what I do. I draft in favor of my client. So you as an attorney, that's what you do. But the problem is, is that the people that draft their own, they've either
9:28
fallen to one of two camps and I've yet to see anything different. If, if you want me to take a look at your contract and tell you, I'm happy to do it, but it's either so extreme and you're just shaking your head going, what the heck? Or it's so law, like blase, like just very like, eh, okay, whatever. I guess I have to have a contract because I'm in business. And, uh, so you, you run that problem, that risk that those are the two camps that they're in.
9:59
Most of the contracts when I draft them, I'm, I'm in night there. Like it's a little bit like Goldilocks. Okay. I mean, it's, it's a little bit like making sure that everything is in the right proportion relative to it, you know, pick what's important and then don't fight her out about the rest. Uh, and, and so you really want to make that nice balance between your rights as the, as the, the offer of the contract and the offery accepting it. Because you can lose
10:29
business because of it. There was a, uh, an opportunity that I had and someone chose not to hire me because of my contract and I totally understand that, but to me, it was important to have my contract the way that it is and that's okay. Everybody has their different preference and that's just how they rolled and I'm okay with that. So, uh, so meeting of the minds, the next thing is considerations. You are giving up something you are legally entitled to. Okay.
11:00
So for instance, a lot of times you have, you have the legal entitlement to your personal time, right? No one can take that away from you anymore.
11:13
So you're giving that up in exchange for money in, in a service industry. Now the same thing goes for a product that you've purchased. You are essentially giving that up in exchange for money, which by the way, it's very rare, uh, like in what's called specific performance that a, a service contract is required to do what's called specific performance.
11:36
And really it comes down to the involuntary servitude. I believe I could be mistaken. My memory sometimes fails is 13th amendment. So courts are very reticent to, to require someone to do a job that they don't want to do for that reason. But as opposed to a specific performance in a, like a home, some sort of personal property that's unique, something that you just can't get anywhere, they'll, they'll require you to perform under those what's called specific performance.
12:09
Um, but so there's consideration involved and that's something you're giving up something that you have a legal right to. There has to be consideration for there to be a contract. If, if without consideration, there is no contract, that's just, you have to give up something and in a bilateral contract. So both parties are giving up something that they have a legal entitled right to. So money on one side time on the other, but they're giving up those things in
12:38
exchange for the other party.
12:42
So some contracts are required to be in writing and I listed those at the beginning, but we'll just reiterate that is if it's a service beyond a year, if it's for goods over $500, if it's real property, and if there's, uh, an assignment for creditors that rarely ever happens, so that's what's called the statute of frauds that you need to do to make sure that you're protected.
13:16
So theoretically, anything under those dollar amounts and that time period, and for if it's not real property, you don't have to have it in writing.
13:27
Should you have it in writing? Yeah, absolutely. Like I, I've said this multiple times. I'll say it again, because it's worth repeating. One of my, uh, uh, law professors used to say, if it goes without saying, it usually goes better with saying. And for me, that just makes it a lot more sense. When people have something in writing, number one, they have something to refer back to number two, it that's clear about what the expectations of both parties are.
13:55
So you're, it's a better relationship when it's clear. And the reason why contracts, in my opinion are awesome is because so much of life, you don't get to pick what happens.
14:10
Contract law is that exception.
14:13
You get to define the relationship. You get to decide what's important to you, how you want to be treated, how the other party is going to treat you, how you're going to treat the other party. So all of these things make contract law, one of the best things that you can become familiar with it as a business owner. And I don't, you know, I teach business law down at, at, uh, Southwestern community college. I don't want you to think that you need to become an expert in contract law
14:41
because that's honestly not the best highest quality use of your time. I want you to think about it in the context of be familiar enough with it. So that when you're looking at a contract, because you should, you should review every contract you see.
14:55
When you're reviewing that contract, I want you to kind of know a little bit more than the average person as a business owner, you should know more than the average person about contracts.
15:05
Most people don't need to know about contracts, but what I want you to do is know enough to know when it's important to talk to an attorney, because at that time, that's when the magic happens. Because when you talk to an attorney and you're on the same page and you're speaking the same language and you're just like, yes, then you can get exactly what you want when you want it. And when you need it and your business can be a lot more profitable that way, because you're not going to
15:32
be fighting disputes in court. You're not going to be dealing with the junk that goes with breaches of contract or anticipatory breaches of contracts, which is also called anticipatory repudiation, which the idea being though, is that you don't need to have all the knowledge, you need to have some of it so that you can be informed about when you need an attorney.
15:58
That's what I tell my students all the time is that the best thing that you can do is have that mindset of I need to know this at least enough to know when I need someone an expert. Same thing goes with accounting, right? I mean, you can balance your own books. You can do a lot of your own financial reports if you're into that sort of thing, or you can hire a CPA or a CFO, someone that can do the money for you and handle those things, but it's important to be that educated buyer.
16:30
And that's a lot of what I do with these videos is I want you to be thinking about this stuff. There was a many, many years ago, there was a bookkeeper up in San Marcos that built her company out of millions because the owner didn't bother to balance his own checkbook or do his own bookkeeping, which is fine. I'm not suggesting you have to, but you need to, you shouldn't have control that over somebody, somebody shouldn't have control over both things where
17:00
there's no check and balance. When many years ago, when I worked for a credit union, we would have to have dual control over stuff. So I would watch even the bank manager count money, okay, or the travelers checks, we would have to both sign off on it saying that we both counted the money. So in your business, when you're thinking about these things, the whole trust, but verify really plays a lot. You can save yourself a lot of headache if you trust, but verify.
17:31
And so like the branch manager couldn't be alone in the vault with the money without someone else in there. So we would have a dual key system where I would have one key, they would have another key. And I would go in there and when we needed to, we would count the vault and that would take, you know, half hour, 45 minutes, something like that. But we would count every single thing in the vault and make sure that it was dual counted because it's not, it's one person
17:56
might get away with it, but two typically don't, right? Because two people won't be in on co-hoots on it. And so and it wouldn't always be me, it would be another employee. So we would take shifts, we would take rotates. So this is the kind of thinking that you need to be doing, because is it likely to happen?
18:17
Maybe not. Is it possible? Yeah. And the last thing you need to do is and that business that with the bookkeeper that defrauded the company out of the millions, yeah, they went out of business, all because he couldn't balance his checkbook. Again, I'm not saying you can't hire someone to do the work that you need them to do, but she shouldn't have been in charge of balancing the checkbook and the books, because she made it look like that they were sending money to third parties,
18:45
and then she would take that money and then go spend it on trips to Milan and all sorts of crazy stuff. So look for these signs where it's like, okay, why do we not have money, you know, in that respect, because stuff like that does happen. And if you leave people alone, to make those choices, then you're giving them too much power, bringing that back to contracts.
19:09
That's the purpose of a good contract is to be clear in your expectations. So that things like that won't happen. You won't have to worry about someone stealing money from you because well, you've you've got a clear contract, your vendors will know exactly what it is, your landlord will know exactly what's going on, you'll know exactly what's going on. It's a much better way of knowing your business than the not. And I see a lot of small business owners
19:40
not paying attention to those details. So these are these are the thoughts. Last one, this is important. Contracts are not valid, not binding, even in a little bit for something. It's illegal.
20:00
The drug deal goes bad. There's no contract. It doesn't exist.
20:04
There's no such thing as a murder for hire contract that's enforceable. No one could sue you. And I know that sounds absurd, but sometimes absurdity happens. Someone can't sue you if someone took out a contract to kill somebody on another person, whatever.
20:20
The other the binding party, if they got stiff, couldn't then sue them for breach of contract. The contract doesn't exist. It's not legal. It's not enforceable. There's nothing you can do in that instance, which I hope that you would take stock of your life and honestly not deal drugs or try to kill somebody. But my point still is value is valid. The last not the last thing, but this is also something considered. There has to be capacity in people's either official capacity.
20:54
So like the president of a company or like in your capacity, if you don't if you can't rent something because you don't own it, then you don't have a contract.
21:07
You can't get a contract at that because of that capacity issue. Also, if you're inebriated, those contracts have been.
21:16
They've been showed lack of capacity. Now, if once you're sober, you reaffirm the contract, then it's a different story. But but those types of things do happen.
21:26
If you've gotten value out of this video, don't forget to hit subscribe and like and know that we go live Monday through Friday at 11 and look forward to seeing you next week. Have a good one. Take care.
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