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Contract Law: Saying Goodbye Effectively


In the first of this two-part series of articles about contract law, we talked about what the elements of a legal contract were and how important signing of a contract was. – PowerPoint PPT presentation

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Title: Contract Law: Saying Goodbye Effectively

Contract Law Saying Goodbye Effectively
In the first of this two-part series of articles
about contract law, we talked about what the
elements of a legal contract were and how
important signing of a contract was. In this
article, well look at what can happen if it all
goes wrong and what you can do to protect
yourself, and your company when closing a
contract and moving on. As someone who has been
through the courts over disputed contracts, I can
tell you that there is both a financial cost and
an emotional one if you dont carefully
orchestrate a contract closure. Many things can
happen over the lifetime of a project that may
result in the relationship behind the project
coming to a close. How you do this can may mean
the difference between a long, protracted, and
ultimately costly process, or one that goes
smoothly and allows both parties to walk away,
hopefully relatively unscathed. Reasons to
Terminate a Contract You normally need to have a
good reason to end a contract. This usually falls
under the remit of one of the following
  • The contract date has ended (there would be a
    clause in the contract to show an end date).
    Sometimes these types of contracts are called
    fixed term contracts and are applied to
    contractors working on specific projects for a
  • After giving reasonable notice. Many contracts
    will have a clause in them which sets out that
    one of the parties can give reasonable notice to
    terminate the contracts. For example, if one
    party decides that they want to terminate the
    relationship they must give 3 months, notice to
    do so, but in those 3 months both parties
    continue to service the promises of the contract.
  • By breach of contract. This is the most difficult
    one to enact and often has to be proven in a
    court of law that the contract breach has
    occurred. Best to avoid this one if possible.
  • The important thing to note is to make sure your
    contract reflects the sort of work you are doing
    with your client. Getting clauses to accurately
    reflect a job is tricky. For example, in
    short-term contracts are fine, but come with some
    caveats. You need to make sure that your contract
    length truly reflects the amount of time it takes
    to complete the project. If you underestimate the
    time and have not completed the work by contract
    end, the following could happen

  • You can extend the contract end, but the client
    may renegotiate less favorable terms
  • There may be a lag between contract renewal,
    which may impact your scheduling
  • You may be persuaded to work outside a contract
    while a new one is being prepared this can
    result in many unforeseen issues around IP
    ownership and copyright
  • Contract Clauses and Termination
  • There are a number of clause types that reflect
    contract termination and or breach
  • Voluntary Termination
  • Contract termination under reasonable notice can
    also be problematic. Contracts, which have a
    termination clause in, often have a specific set
    of rules, which enable termination. For example,
    it may state that termination can occur if one or
    other party suffers a disability. Termination can
    also be set as voluntary termination. A clause
    of this nature will allow a party to terminate a
    contract with no agreement from the other side.
    This type of termination is usually only possible
    in the USA if there is a material issue with
    completing the contract, or it simply cannot be

Termination for Convenience This is a
double-edged sword kind of clause. It allows
either party to simply give notice to terminate
the contract for no specific reason. Great, you
might think as you may find that your old
contract, under old rates, is using up valuable
time where you could be working for your much
higher rates. If you can get rid of this old
client, you can work half as much for twice as
many dollars. Trouble is, they can also terminate
the contract, at will, whenever they like. So use
this clause sparingly and wisely. One other set
back with clauses of this nature is that they
often have an agreement to pay compensation if
enacted so watch out for that too. Rescinding
a contract Certain sorts of contracts in the
USA are allowed to have a rescission clause. They
are usually service contracts and allow the buyer
/ client to rescind the contract within a given
period of time, usually 60 days. Impossible
Yes, the word impossibility can be applied to
a contract. Youve got to love law-speak. This
usually applies to contracts, which become
impossible to perform. Of course, with this being
a legal term, it has degrees of impossibility
associated with it. Things can be absolutely
impossible (Im sure weve all experienced
those) and subjectively impossible. Things such
as natural disasters, new laws being passed and
serious injury, can be used to determine
impossibility. If you want to end a contract
using this clause, you will need to prove this in
court. Breach of contract This is the biggie
and scary one. If one or other party does not
perform their promises stated in a contract the
contract is said to be breached and can be
terminated. Ending the Contract or E
Contract Whichever clause you enact to end a
contract or e contract, you invariably need to
involve a lawyer. This does not mean a day in
court. Court costs can be horrendously expensive
but advice from a lawyer, although still
involving costs, can save a lot of money in the
long run. The best way to deal with any contract
is to make sure that it is right from the start.
Creating a watertight contract does not have to
be difficult. Here are a few tips to make sure
you get it right first time and avoid your day in
court Be prepared Firstly, you will often find
that you can re-use the same basic contract
structure for each new client. You may make a few
minor changes, but the important clauses, such as
termination clauses, often remain the same. Using
a lawyer to create a robust contract in the first
instance means that future contracts can be based
on this template. Digital signature portals, like
the ApproveMe system, work with the concept of
contract templates for this very reason. Make
sure all stakeholders have read the
contract Once you have your contract, make sure
every signatory of the contract has read it
thoroughly and understands the implications of
the promises and other clauses. They will be
agreeing to them when they add their signature.
Again, ApproveMe helps with this process by
entering the contract in a document management
control system.
Have all stakeholders sign the contract If you
are using an e contract system, like ApproveMe,
you can make sure this part of the process is
streamlined. The e contract is sent to each
stakeholder, who in turn authenticates that they
are who they say they are, before adding their e
signature on the contract. If and when it comes
to the time that the contract is to end, or
worse, you have a contract breach, you will have
documentary evidence in the form of audit trails
and even revoked signatures, showing who saw the
contract and agreed, on both sides. If you do end
up in court, having an ESIGN compliant e
signature on an e contract will make the process
much easier and therefore much cheaper. Laws
like ESIGN and UETA mean that correctly applied
digital signatures carry the same weight as
traditional pen and ink signatures. Electronic
signature, technology, however can go one step
further and create fully audited trails of
document access, signing, and agreement. It even
protects those all-important clauses from abuse.
If anyone tries to change that clause saying you
need 3 months notice to terminate, the digital
signature will become invalid and alert all the
stakeholders to the change. To make sure you
have your contracts in order, check
out ApproveMes integrated WordPress digital
signing solution.   Article Resource