LEARNING OBJECTIVES:
When you have completed this module, you should be able to
- Explain the importance of contracts to business
- Explain the difference between
- express and implied contracts
- bilateral and unilateral contracts
- executed and executory contracts
- valid, void, voidable and unenforceable contracts
- Identify which contracts are subject to the common law and which are governed by Article 2 of the Uniform Commercial Code
- For common law contracts, you should be able to explain
- the elements required to form a valid contract
- the assent defenses that negate the existence of a contract
- the purpose of the Statute of Frauds
- how performance discharges a contract, as well as the circumstances that excuse the performance of a contract
- the types of damages or equitable remedies available for breach
General Resources: Readings from Textbooks
Readings & Videos: The Business Law Professor on Business Contracts Prof Jason Gordon provides short videos and text to explain the fundamentals of common law contracts, e.g., definitions and classifications of contracts, the elements of a valid contract, defenses to and excuses for non-performance of a contract, and remedies for breach of contract.
Reading: Contract Law, Chapter 8 from Government Regulation and the Legal Environment of Business textbook by Mayer.
Reading: Contract Law, Chapter 6 from the Legal and Ethical Environment of Business textbook by Lau and Johnson.
Reading: Contracts, Unit 4 in the Business Law textbook by Saylor Academy.
Other General Resources
Video: Introduction to Contract Law and Contract Theory (13:22). This video by Prof Ida Jones introduces the elements of valid and enforceable contracts and how contracts are classified. She also devotes a number of slides to “review” problems with answers provided for readers who want to practice what they’ve learned.
Reading: Contract Law Tutorial. Training in basic contract law for New Mexico judges provided by the Judicial Education Center. Includes brief scenario-based exercises to assess your understanding of common law contracts.
Reading: Contracts Explains contract terminology, classification and elements of contracts, consent, discharge, performance, remedies and other legal concepts. Read those sections that are relevant to your course.
Website: Article 2 of the Uniform Commercial Code The UCC supersedes the common law when the contract relates to the sale of goods, which the UCC defines as tangible, moveable property such as retail goods, furniture, cars, and computers, but not real property (land and buildings) or intangible property (stocks, bonds and intellectual property like copyrights and trademarks).
Reading: Extensive outline of basic contracts law, with brief explanations of the elements of valid contracts, remedies, limitations on damages, defenses to the validity and/or enforce-ability of a contract, including Statute of Frauds. The outline also includes many examples to illustrate how contract terms and rules apply to actual cases. [Downloads as a word document]
Why are Contracts Important to Business?
Reading: What is the Importance of Contracts to a Business? This brief article by Osmond Vitez for Chron.com explains why business should use contracts, e.g., to fix the cost of resources and limit the company’s obligations.
Reading: The Importance of a Written Contract in Business Transactions This post by a law firm in May (2015) explains the benefits of a written (over oral) contract.
Video: What is a Contract? (2:53) This video produced by USLawEssentials explains that contracts are legally enforceable promises. It also briefly introduces you to the elements of a contract. If you find these videos helpful, check out more than 30 other USLawEssentials videos on contracts on YouTube.
Video: What is a Contract? (1:50) Contracts can be written or oral. This video should help you learn what makes a contract.
Video: Statutory and Common Law Contracts (2:52) Many contracts are governed by the common law, e.g., contracts related to property, employment and services. Contracts for the sale of goods are governed by Article 2 of the Uniform Commercial Code. This video explains these legal sources and the types of contracts they govern.
Classifications of Contracts
Video: What are Express and Implied Contracts (3:11). This USLawEssentials explains the difference between express and implied contracts and introduces the concept of quasi-contract.
Video: Express versus Implied Contracts (2:56) Contracts can be formed by parties exchanging words or by actions. Prof Gordon discusses the different ways a contract can be formed.
Video: Executory versus Executed Contracts (1:58) This video explains the distinction between executed contracts (already performed) and executory contracts, where the parties have yet to perform part or all of their agreement.
Video: Enforceable versus Valid Contracts (2:16) The courts will only enforce valid contracts. This video explains what a contract needs to be considered valid and enforceable.
Video: Voidability of a Contract (5:41). The court will not enforce a void contract or a voidable contract, where one of the parties has exercised his power to invalidate the agreement. This video explains when a contract is void and when it is voidable.
Elements of a Valid Common Law Contract
PowToon Video: Elements of a Contract (1:47)
Reading: Elements of a Business Contract by Jeremy Bradley for the Houston Chronicle
Video: Requirements to Form a Contract (1:02) Prof. Jason Gordon explains three essential elements necessary to form a contract: Offer, Acceptance, and Consideration.
Video: What is an Offer? (2:41) The Offer is the first step to contract formation (another Prof. Gordon video)
Video: Accepting an Offer (3:40) Before a contract can be formed, the offer must be accepted. (Prof. Gordon)
Video: Mirror Image Rule (3:37) Prof Gordon explains that to create valid common law contracts, the parties have the same understanding of all terms to have “a meeting of the minds” sufficient to form a contract.
Video: Contract Law: Offer and Acceptance (26:06). In this longer video, Prof. Ida Jones teaches the rules related to offer and acceptance for both common law and UCC contracts. Like her other teaching videos, she includes “review questions” with answers to test your understanding of what you just learned.
Video: What is Consideration? (4:35) Both parties must exchange consideration, i.e., something of value for a contract to be enforceable
Video: Contract Law: Consideration (25:12). In this final video on contract law by Prof. Ida Jones, she provides an in-depth look at consideration — what it is, what satisfies the consideration requirement, and what is not sufficient to provide consideration to create an enforceable contract.
Video: Mental Capacity to Contract (2:01) Some parties lack the capacity to enter into a contract. This video explains which parties lack capacity and what happens if they enter into agreements.
Video: Mistake in Forming Contract (3:32) A brief explanation of the effect of a mistake by either or both parties in forming a contract.
Video: Enforceable Contract – Lawful Purpose & Public Policy (4:21) Explore what makes a contract enforceable.
Video: Statute of Frauds (4:05) Learn the limitations of verbal contracts and when agreements must be in writing to be enforceable by the courts.
Performance, Discharge, Breach and Remedies of Common Law Contracts
Reading: How to Enforce a Business Contract by Louis Kroeck for the Houston Chronicle
Video: Duty of Performance (1:56) Understand the obligations parties have under a contract.
Video: Performance, Substantial Performance, and Breach (3:12) Learn important performance concepts.
Video: Discharge from Contract (1:47) Learn the different ways that a party’s obligation to perform a contract may come to an end.
Video: Waiver or Release from a Contract (1:22) Understand how parties can be waived or released from performing a contract.
Reading: What Is the Most Common Legal Remedy for a Breach of Contract? Findlaw explains basic contractual remedies.
Website: Remedies for Breach of Contract by the Judicial Education Center. Understand the different types of remedies the courts can award for contract breach.
Video: Breach, Damages, and Remedies in Contract (5:32) Learn the concept of breach of contract and the types of remedies (including monetary damages) that can be awarded by the court when a contract is breached.
Video: Contract Remedies (5:18) Explore contract remedies in more depth.
Want to learn more about business contracts?
These readings and videos allow you to dig deeper into contract law to better understand how (and why) businesses use contracts. You’ll also find samples of some common business contracts (e.g., commercial leases, employment agreements, and separate non-compete, non-disclosure and non-solicitation agreements.) As many of my students are interested in representing music performers or careers in music production, you’ll find a separate section on Music Contracts.
Importance of Business Contracts and Basic Advice When Drafting a Contract
Video: Contract Law (1:23:35). This is a comprehensive overview of contract law for those who want a deeper understanding of the subject.
Video: Business Contract Basics – Important Points to Remember When Putting Together a Contract (11:17)
The video talks about negotiating contracts, key terms like pricing and payment terms that need to be included, and the importance of signatures!
Podcast: Many Businesses Thought They Were Insured for a Pandemic. They Weren’t! This Freakonomics podcast from October 2020 looks at “business interruption” clauses in contracts and whether they covered the interruption to many businesses caused by the pandemic.
Video: : Common Contract Clauses (14:34)
Video: Why You Must Always Use A Contract And How To Write One (7:48)
created by Dempsey Marketing to explain why entrepreneurs should always have attorneys review their contracts – it can save their business!
Video: Importance of Contracts & Employer/Employee Contracts (1:14) by attorney Michael Shapero.
Video: Why should you have a lawyer draft your business contract or agreement? (2:07)
This animated video explains the importance of using an attorney to draft your contract.
Video: How to Create Your Own Contracts and Agreements – For Small Businesses, Entrepreneurs (5:44)
by LeKeisha Lopez
Music Business Contracts:
Reading: The 11 Contracts Every Artist, Songwriter and Producer Should Know (Steve Gordon, February 2015, for Digital Music News)
Website: Free Music Contracts posted by HipHop Productions. As the website states, “We don’t recommend just downloading these and printing out right away – you will still need to download the file you want, and make any changes to reflect your individual purpose. These are only provided as a starting point for your project – and nothing can replace the advice of a good entertainment business lawyer.”
Website: Music Business Contracts
This website sells sample contracts used in the music business, grouped in categories such as artist management contracts, concert production contracts, film and TV contracts, music performance and production contracts.
Sample Commercial Lease (Common Law)
Sample Commercial Lease (prepared by the law offices of Ted Kobernick). This 4-page document illustrates the standard terms of a commercial lease.
LawDepot Website: Template for creating a Commercial Lease This website provides information on the types of provisions that every commercial lease should include (e.g., lease term, operating costs and utilities, taxes, parking, landlord responsibilities). It also has templates for creating a variety of commercial leases – for offices, restaurants, retail establishments, warehouses, etc.
Sale of Goods Contracts (UCC)
Reading: Contract for the Sale of Goods (Seller-Friendly Version)
This short, simple contract sells goods “as is” (without a warranty) and includes limitations on liability and the buyer’s ability to file an action against the seller and thus is considered “seller-friendly.”
Reading: Sample Sales Agreement
(short contract that illustrates key terms of a UCC agreement).
LawDepot Website: Create a Sales Agreement
Reading: Sample International Sale of Goods Contract under the CISG
If you’re interested in international business transactions, compare the provisions in this CISG contract with one of the sample UCC contracts above.
Sample Employment Contracts and/or Contractual Provisions (Common Law)
Reading: Negotiating Employment Agreements: Checklist Of 14 Key Issues (by Richard Harrach for Forbes in November 2013). Though old, it identifies many of the primary concerns that an employment contract should address.
LawDepot website: Template for creating an Employment Contract Learn about different provisions for full-time, part-time and fixed-term employees, probationary periods and other clauses to include in an employment agreement.
LawDepot website: Template for creating a Non-Disclosure Agreement (NDA) for an employment contract or to use in the sale of a business Accompanying text explains purpose and types of NDAs, as well as the types of confidential information an NDA can protect if properly drafted.
LawDepot website: Template for creating Confidentiality Agreements Like the NDA website above, this LawDepot website explains the types of information that can be protected, when such an agreement should be used, and how confidentiality agreements differ from non-compete and non-solicitation clauses.
Sample Executive Employment Agreement (created by the law firm of Ray & Isler and posted by the Society for Human Resource Management)
Non-Compete and Non-Solicitation Agreements
Reading: An Overview of Non-Compete Agreements by Findlaw
Reading: The Limits of Non-Compete Agreements (by Adriana Gardella for Forbes in July 2015) . This article discusses why courts may be reluctant to enforce such agreements.
Video: Discussing the Impact of Georgia’s Restrictive Covenants Act (3:15)
Reading/Video: What You Should Know About Non-Competes
(from the July 14, 2016 Newshour on PBS) The segment begins with the claim that nearly 40% of all US workers have signed a non-compete agreement!
Reading: Understanding Non-Solicitation Agreement
Specific Common Law Contractual Rules
Reading: The Mailbox Rule
(which determines when an acceptance becomes effective and what happens if an acceptance and a revocation or rejection “cross in the mails”)
Reading: The Mailbox Rule
explained by 4LawSchool
Reading: The Statute of Frauds
(common law and UCC) explained with examples