Vol. 10, #1-March 26, 2018 ALLAN GOLD’S BLOG
1st weekly blog post of series over 3 months on contracts for company executives & owners of family-small businesses
TODAY’S TOPIC: “CONTRACTS – The case of the contract that never was, or was it?*
That’s the question?*
SPECIAL ANNOUNCEMENT TO READERS
√ Hello Readers. Please be informed that I write a blog for my professional community – it’s titled “Gold’s Legal Minute*GLM*” . Because you do not have a lot of time and since time is money, I aim for a quick and easy read. Since I practice primarily in such fields as corporate and commercial law, civil litigation, etc., the subject matter is more or less in such areas. In addition, seeing that I am passionate about the well-being of older people, and as I also practice in the field of civil law relative to elder law, I write about this area as well. Furthermore, I write about topics in the news in order to highlight what’s then legally at issue.
√ In each blog post, I shall deal with a legal notion or raise a legal issue and deliver, strictly for informational purposes, some commentary respecting the same. As per the format, I shall first answer the question, “Why you should read this?” Next, in the facts section, to illustrate some of the things in play, I will recount a fictional story of imaginary characters or companies, not based upon any person or enterprise in real life. For fun, it will be titled “The Case Of The …”, this in the style of the vintage “Perry Mason” TV show (1957–66). And then, through the sections, “Judgment”, “Analysis” and “Lesson Learned Or Take-A-Way”, I shall provide my take on the facts and some thoughts thereon. At the finish, I will offer a “Closing Thought Of The Day” plus a preview of the next in the series.
√We are re-launching the blog this week, such with a series over 3 months on contracts, especially geared for company executives & owners of family-small businesses. Kindly note that as per our schedule, we will make new blog uploads each Monday. Some weeks, usually on Wednesdays, there will be one or more bonus uploads – the first one will be Wednesday, this week.
• WHY YOU SHOULD READ THIS WEEKLY BUSINESS SERIES OVER THE NEXT THREE MONTHS
First, this blog post series is written especially for business people, ranging from proprietors of small-family enterprises through to executives of mid-to-large corporations. The assumption is that they routinely make contracts. The proposition is that it’s good business to make each contract sound and profitable. The premise is that a good contract can mean money and profit. And if you’re a member of this group, this is for you. Second, being intelligent and recognizing that you don’t know everything about everything, you’re open to learn. And wanting to be an even better business man or woman, you wish to become more informed, thusly more confident in your contract-making endeavours. Indeed, you aspire to be a stronger contractant!
• FACTS OF THE CASE
Note to Readers: In this space, we will recount fictional stories of imaginary characters or companies, not based upon any person or enterprise in real life.
Scenario #1: John Dirty Rotten & Sky Squeegee
Scene #1: There was this guy, named Johnny Dirty Rotten, looking for the fast life in the fast lane. And like most 20- something males, he lusted for his very own car. Finding a worn-out jalopy, he set to work on making it his very own “Little Deuce Coupe”. He was constantly daydreaming of putting his driving machine in top form, getting it all revved up and taking it out for a spin. Sourcing parts from a scrap yard, he fixed it all up, repairing the body, changing the rims and tires, rebuilding the engine and tuning it right up there. The last step was to install a race style steering wheel and add decals & stripes. One day, with the car doing great under the hood, with the hum of the engine in his ears, he put it into gear and was off and running . But a red light at the corner of Stop & Go, brought him to an abrupt stop. And that’s where the incident happened.
Scene #2: You see there was another guy, named Sky Squeegee holding a window washing tool. Day in and day out, you could find him at his corner – you guessed it – at the intersection of Stop & Go. When Dirty stopped, he spotted Sky as someone, whom he thought to be homeless, living by asking for money or food. Sky smiled and said: “What’s your name …Where did you get that racing machine?” Dirty proudly answered through the open window, “I’m John Dirty Rotten. And yes my “Little Deuce Coupe” is quite the car. I did most of it myself. It’s really juiced up!” Then as per his usual routine, uninvited and with no prior notice, Sky approached the stopped car, (and with Johnny not objecting in any way), cleaned the windshield and without an agreed price, stuck out his hand for payment. Since the front windshield was a key part of the car, he thought to himself that $10.00 was the right price for the service. Dirty answered with his finger; and Sky aggressively ran towards the driver’s side door and open window, shouting obscenities. Thinking he was something of a “Speed King”, Dirty shifted into top gear, powering off doing a ‘wheelie’, leaving burn marks on the pavement. Sky noted the license number, yelling out: “We had a deal – I’ll see you in court!” Dirty grimaced at the threat.
Once Dirty turned the corner, thinking he needed to put everything in writing, Sky pulled out a car accident form, and completed it, noting the name of the driver, i.e., John Dirty Rotten , the car make & model, license # and the location of the incident. Sky also signed it.
Scene #3: Bob the lawyer next came by in his car. Squeegee did his thing and once Bob’s window was clean , instead of asking for money, Sky told him the “Deuce Coupe” story and said that he wanted to sue Dirty Rotten. You see, Sky wanted to know if he should sue and his chances to win. In addition, Sky told Bob that he’s planning to change his come-on and develop a new sales pitch. He proposed approaching the car, saying: “I’m the best car windshield cleaner in the world. I’ll do yours for $10 COD…satisfaction guaranteed. In one minute flat, I‘ll have you out of here with the cleanest windshield in town!” He asked Bob if he would be more protected with this new approach.
So readers, does Sky Squeegee have a case? Did John Dirty Rotten make an error? Would the new come-on and sales pitch be better?
• JUDGMENT
Although, Sky Squeegee does NOT have a case which should go to court, John Dirty Rotten erred since he could have acted more defensively, taking certain precautions. And yes, the new come-on and sales pitch would strengthen the legal position of Sky Squeegee.
• ANALYSIS
Let us put this case under a microscope.
Mistake #1: Squeegee’s not realizing case too small to pursue
Of course, the quantum (amount at issue) was much too small to pursue in the courts. Squeegee should not take action. It would not be worthwhile, taking into account, the sum to be recovered as compared to the cost in filing fees incurred and the time and effort to be expended.
Mistake #2: Squeegee’s not recognizing there was no case
Squeegee may see clearly when it comes to windows, but he was confused on the topic of contracts. He also built up his alleged claim to be much more than it actually was. He should have recognized that he did not have much of a case.
First, in the fact pattern of the case of Sky Squeegee vs. John Dirty Rotten , there is no contract. Johnny did not make any offer to Squeegee, nor did Squeegee make an offer to Johnny. Johnny did not invite Squeegee to carry out the service. And Squeegee did not give Johnny any prior notice of the intended performance of the service. In addition, Squeegee did not specify the price beforehand. There was no consent to the principal elements of the alleged contract. Second, it is quite reasonable to conclude that Johnny did confuse the act of begging with a windshield cleaning contract.
On the civil law side, as per Art. 1378, Civil Code of Québec, CQLR c CCQ-1991), a contract is defined as “an agreement of wills by which one or several persons obligate themselves to one or several other persons to perform a prestation. ….” (To further explain the notion of contract, mention is made of Art. 984 (now repealed ) of the Civil Code of Lower Canada, CCLC, which specified the four requisites to the validity of a contract as being: (a) Parties legally capable of contracting; (b) Their consent legally given; (c) Something which forms the object of the contract; (d) A lawful cause or consideration. (N.B. On the common law side, a contract is a legally recognized agreement between two or more persons which gives rise to an obligation that may be enforced in the courts.)
Mistake #3: Squeegee thinking a written report makes a contract
Perhaps, there is a written report after the incident at the corner of Stop & Go. And even if it contains the name of the driver(s), the make and model and license number of the automobile(s), the place of the roadway incident, it’s a unilateral document, handwritten and signed by only one party. Squeegee may have thought that he was being smart by putting something in writing, but this writing in itself, does not constitute a contract.
Mistake #4: Johnny erred in not acting defensively, taking precautions
John Dirty Rotten erred since he could have acted more defensively, taking certain precautions. He saw someone holding a window washing tool; and this usually means that this person might try to clean the car windshield. It was then foreseeable that Sky would carry out this act. And while Sky came uninvited and with no prior notice towards the car, Johnny did not object in any way whatsoever; and it could be argued that there was quite possibly, tacit consent by Johnny to the performance of the service. While the price may not have been mutually agreed, perhaps it could be argued that the giving of a coin such as a loonie was quite common. This doesn’t necessarily mean that Johnny would lose the case, but it may cost him dearly in order to contest the suit. And he may have some difficulty with the written report, if offered up as being a “commencement of proof in writing”.
Accordingly, Johnny could have and should have objected to any possible service being rendered by Sky Squeegee. He also could have alerted Sky that even if window washer cleaned the windshield over Johnny’s objection, Johnny would not make any payment and so Squeegee was working for nothing . The point is that if you do not want to pay for something, don’t take it or accept it or be seen as seemingly accepting it. In hindsight. someone should say to Johnny: “Not so fast cowboy…you`re coming to rough terrain….so fasten your seat belts and take your foot off the gas!”
Added Note:
Yes, the new come-on and sales pitch of Sky Squeegee could enhance his legal position in the future. You see Squeegee would be making an offer of a specified service to be carried out within an indicated delay, all at a pre-set price to be paid “COD”. If the car driver says “OK”, there is an acceptance. Indeed, he would be more protected with this new approach.
Nevertheless, it should be noted that Squeegee may have some trouble from his holding himself out as being the best, and by saying that the window would be the cleanest and “satisfaction guaranteed”.
• LESSON LEARNED OR TAKE-A-WAY: Here’s the contractual two step.
Executives & family business owners routinely make contracts. Since a good contract can mean money and profit, it’s good business to make each one as good as possible. Here’s my contractual two step.
- When you set out to make a sale or do a deal, know that you’re making a contract. ASK yourself the following questions: (a) Who are the parties and can each one legally make a contract and if a corporation, is the signatory, a representative, able to bind the company? (b) Is there consent and has each party given it legally? (c) Is there something definite and legitimate, which forms the object of the contract? (d) Is there something definite and legitimate, as the cause or consideration? Indeed, if you are about to make a contract, don’t take the elements for granted. Instead, do it right!
- While an oral contract is possible, it’s difficult to prove. And even when you can offer evidence of the existence of an agreement, the problem is the ‘apples and oranges’ effect. This is when one party is thinking about “apples”, while the other has “oranges” in mind. In other words, the parties are agreeing to different things – this means that the contract may be annullable. That’s why it’s best to put the contract in writing, therein reciting the terms and conditions, in the fullest manner possible . Indeed, the hope is that this will illustrate their being on the same page!
• CLOSING THOUGHT OF THE DAY: In contract, here are the five key things to watch out for
While Aristotle said: “The ideal man bears the accidents of life with dignity and grace, making the best of circumstances”, an ideal businessman is not supposed to bear the effect of a bad contract. This is because it’s not an accident. It doesn’t just happen – he does it to himself, exhibiting either negligence or incompetence or both. Here are some examples.
- It’s not just foolhardy, but more, ‘lose, lose’, if you make a contract, knowing that a condition or the performance of an obligation is impossible. Indeed, surface implausibility should be adequate reason to pass on the deal.
- It’s highly problematic when dealing with fraudsters. You see, in contract, what transcends all types, is the need for good faith.
- It’s suicide, if you make a contract, knowing that you cannot fulfill your obligations. Indeed, a good businessman never makes a contract unless he’s Very sure that he can carry it out.
- It’s extremely risky, if you want to make a contract with someone known to repeatedly break them. Of course, if you don’t learn from the past, you’re asking for big trouble. (N.B. The exact quote is attributed to writer and philosopher George Santayana, who wrote: “Those who cannot remember the past are condemned to repeat it.”)
- It’s highway robbery, if you have a lousy product, and still go to market. You’re also putting yourself into jeopardy. It’s not only because dissatisfied customers shall bring suit asking for their money back, seeking damages from losses, etc. But more, if the non-execution or mal execution is known and/or foreseeable, liability will likely increase.
I think that you get the point. It’s best you make contracts smartly…don’t you think?
* ©/TM 2018 Allan Gold, Practitioners’ Press Inc. – ALL RIGHTS RESERVED
- PREVIEW OF NEXT IN THE SERIES: EMPLOYMENT CONTRACT
The case of the bad hire, the good hire and the “probee”*
Next time, continuing on with the theme of entrepreneurship, and the overall subject of contract, we will look at another type of contract, this one being very common in the business world, notably, that of the contract of employment. Of course, employment is an essential feature of economic activity At its base is the relationship between the person employing and the person being employed. From the perspective of the employer, it’s all about productivity, cost of labor, and ultimately profit. But in the view of the worker, it’s about making a living and advancing a career. The deed starts with the designation of the parties. In this writing, there are money clauses delineating the remuneration. In addition, there is a default clause, a resolutory clause – this is the forfeiture of term, etc. There can also be special terms and conditions. Furthermore, there are standard form provisions, wherein the parties recite their usual declarations and undertakings. Dismissal is the end, or is it? Not familiar with this? See you next time.*
* ©/TM 2018 Allan Gold, Practitioners’ Press Inc. – ALL RIGHTS RESERVED
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NOTICE-CAUTION-DISCLAIMER
The material provided herein is of a general nature, strictly for informational purposes. The interpretation and analysis is not to be misapplied to a personal situation with a particular set of facts. Under no circumstances, are the herein suggestions and tips, intended to bring a reader to the point of acting or not acting, but instead, the hope is that they are to be a cause for pause and reflection. It is specifically declared that this content is not to be a replacement of or substitution for legal or any other appropriate advice. To the contrary, for more information on these presents, related subjects or any other questions, it is the express recommendation of the author that everyone seek out and consult a qualified professional or competent adviser.