​Ever dreaded the thought of seeing your ex-employees or ex-partners as competitors? If yes, you aren't the only one who worries about the same. 

This is where the idea of a “non-competition agreement” (or a “non-compete” for short) comes into the picture. 

Employers, who wish to protect what they worked hard to build, make it a point to have a non-compete for its employees or the business owners that are part of a partnership.

Wondering what “non-compete” is and how to effectively draft a non-compete agreement ? 

This article will help you understand these items.

What Is A Non-Compete?

To define, a “non-compete” or a non-compete agreement is a contract that binds the employees in the sense that they will not work with one of the rival companies. 

Also, the agreement restricts them from setting up a new business in the same domain, or to put it this way, employees cannot set up a similar company. 

What's important to note here is that the period for which the above stands true must be specified in the agreement.

One of the goals behind the creation of such an agreement is to prevent the employees (or partners) from sharing sensitive information with rival companies. 

In a way, the employers succeed in preserving the company's information, limiting the possibility of former employees exploiting sensitive information.

This could be anything from marketing plans, contingency ideas, trade secrets, and/or customer/client lists. 

In other words, you prevent an employer or partner, for a certain time period in a particular area, from competing against you while using your own information and property against you.

Creating An Non-Compete : Information To Be Added

Creating a Non-Compete requires a whole lot of information to be added to the contract.

Every contract must specify the name as well as the address of the involved parties. By involved, we mean to say the Protected Party (the one that is requesting the agreement) along with the Noncompeting Party (the one that agrees to the non-compete clause or contract)
The starting date and the duration for the agreement .
The reason behind the creation of the agreement
The geographic area within the agreement. It may so happen that the employee is prohibited from entering into a similar trade in New York, for instance . In this case, they can always set up their business out of the geographical region.
The compensation for signing the agreement, if any.
The individuals that are required to sign the agreement.

Drafting The Non-Compete

With that being said, we now see what is the best way to draft a non-compete clause or contract and prevent ex-partners and ex-employees from becoming your competitors.

A Non-Compete For Core Employees: Legally the conventional contract signed by every employee might not hold importance in the court as restricting everyone to work outside the organization isn't relevant. It is best to have a non-compete agreement for employees at the critical or sensitive positions.
Adhere To State Laws: Not every state abides by such an agreement in the same fashion. Even if you impose one, if it's against the state laws, it may not hold up in court.
Keep It Subtle: You need not put too many restrictions on the employees or partner. Instead, keep it short and pose as many restrictions as required.
Reminders: As and when the employee or partner leaves the organization or the partner quits the engagement, make sure you remind them of the non-compete, expecting that they would stand by it and not do things that aren't acceptable.

Keeping all the above in mind, you can now start creating the non-compete agreement for your employees and partners.

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Yoel Molina, Esq. (AKA “Mo”)

​How To Properly Define a Breach (A.K.A. a Broken Contractual promise) In Your Contract To Protect Your Interest

Entering into a business relationship whether, with one of your acquaintances or a completely unknown entrepreneur or business, you must be careful about what terms you lay out for the venture. 

The best and the legally acceptable way is, to create a contact or an agreement, whereby each of the involved parties agrees to everything written within it.

As good and efficient that may sound, often one of the parties goes beyond the line and does something that induces a breach in the contract. 

Now, this is something intense and if not dealt with, could cause tremendous harm. 

To help you understand the same, this article will shed light on what a breach of contract is and how can you add a clause that specifies how to deal with such situations.

Breach Of Contract: Defining The Term

As per wikipedia, "Breach of contract is a legal cause of action and a type of civil wrong, in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party's performance."

In simple terms, when one of the parties fails to act upon their agreed-on terms or violates any of the clauses as mentioned in the agreement, the contract is breached or the promises in the contract are not kept. 

These matters are often resolved outside the court, yet a few prefer to deal with it in court.

When Does A Contract Get Breached?

A breach of contract, as mentioned above, could be anything as trivial as not clearing payments on time to something more intense like not completing the order on time. 

To be precise, a breach occurs when:

One of the parties refuses to act as mentioned in the agreement. Let's say, for example, the party is expected to run through a company's infrastructure and generate an assessment report on weaknesses. If it refuses to do the job, it leads to a breach of the contract.
Consider a situation when the job is done, say the assessment is created, but the report appears to be of subpar quality .
If a company fails to deliver the goods and services this can be a breach . If the contract lists out the date for completion, it is a must for both of the parties to stand by the same.
Failure to pay for services either on time or not paying at all causes a breach of contract. .
Lastly, when a party fails to deliver the product or service, it accounts for a breach and the situation must be dealt with effectively. 

How To Deal With A Breach Of Contract?

Knowing what all can cause a breach of contract; the next thing to do is finding ways to deal with it.

Orally: All of the involved parties can sit and enter into a conversation where they discuss what has happened and then find a solution.
Written: On the flip side, most of the top-tier organizations prefer having a clause added within their agreement so when the time comes, they would know how to deal with the situation without taking the matter to the court.

Drafting The Contract:

It is important to have all of the reasons listed in the contract for that to be functional, irrespective of the cause that can be considered a breach. 

Also, make sure that the clause added doesn't contradict or get contradicted by any other clause in the agreement. Confirm with the signing parties that they have read the terms and clause before penning their signature.

Once confirmed, go ahead, get the approval and you are now secured to deal with unexpected breaches.

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Yoel Molina, Esq. (AKA “Mo”)

​As anyone who owns a business knows – contracts are an indispensable tool to get things done and protect your business interests. However, if you don’t know anything about the laws that govern contracts, you may be doing more harm than good when you put pen to paper. Let’s talk through some of the basics of contracts and the law to make sure you have a good understanding of what’s at stake.

What Is a Contract?

This is basically a legally-enforceable agreement between parties (two or more) that obligates both parties to fulfill particular things as specified within the contract. By party, this can mean a person, country, company, corporation, etc. What you want to keep in mind is that two things are always implied when the word contract is used:

●That there is an agreement made (something for something)

● The agreement is legally enforceable

What Laws Pertain to Contracts?

One thing about contracts is that the laws that govern them are determined by the state where the agreement between the parties was made. There may actually be a couple of types of state laws that govern the contract as well – depending on what type it is (e.g. property lease, sale of goods). For example, these are two types of law:

1. The Uniform Commercial Code or UCC: These laws govern contracts used for the sale of goods. The UCC is a standardized set of guidelines that oversee commercial transactions. While the code is not law itself, most states have adopted all or part of the code as law.

2. The Common Law: Other business contracts may be governed at least in part by “common law.” This includes all contracts like employment contracts, leases, etc. Each state has their own common law made from court decisions within the state over the years.

How is a Contract Created?

Any time an offer is made and accepted after a sufficient amount of “consideration,” a contract is legally valid. Let’s examine what these terms mean in the context of contracts:

1. An Offer: the terms of this offer must be clear and certain, and the party to whom such an offer is made must reasonably expect the offering party capable of the offer.

2. Acceptance: This is a clear expression from the party receiving the offer that they accept its terms and agree to it.

3. Consideration: There must be some gained and something obligated for all parties involved for the contract to hold. There must be an exchange of some kind of value.

What Happens when a Contract is “Breached?”

Anytime a dispute arises over a contract, one party may feel another party is failing to adhere to the terms of the contract they are obligated to adhere to.

This is considered a breach and can result in legal action by the non-breaching party in an attempt to remedy the situation, which can happen in a number of different ways depending on the type of contract and breach.

How Are Contracts Enforceable Under the Law?

In the event that there is a breach of contract, the most common way to attempt to remedy the situation is to use a lawsuit through the court system.. However, there are other options for dispute resolution before turning to out-and-out litigation. These alternatives are mediation and arbitration.

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Yoel Molina, Esq. (AKA “Mo”)

​Business contracts may not be limited to a one-time engagement. At times, the engagement lasts longer and is progressive.

What this implies is that the contract may be progress-based. When such is the case, it is important that the process is properly mentioned in the contract and both parties are well aware of the clause.

For the uninitiated, adding a record-keeping process in a “progress based contract” assures that the terms of a business contract are clear and that the parties agree to the same. 

Avoiding to overlook the documenting process will save you from the hassle of clearing confusion in the future. 

This article is specifically designed to help you understand what a progress-based contract is and how adding the recordkeeping procedure to the process helps.

What Is A Progress Based Contract?

Consider a situation when the arrangement between the two parties is for some specific time duration, say 24 months. 

Throughout the same, one of them is expected to pay for the services offered by the other.

Or say, if one of them is a buyer and the other a seller, the latter is expected to ship products every three months. 

Depending upon the schedule , the buyer must pay for the products shipped, either before or at the time of delivery. 

This is a “progressive business contract” and works differently in comparison to the conventional ones.

It could be a partnership agreement or a vendor agreement that provides services or goods, or a vendor contract for a market,, store, construction site, or construction project where goods or services are required over a certain period. 

The duration could be determined beforehand alongside a conditional obligation to perform the task.

It is important to document or keep a record of the process so that it can be referred to as and when needed. 

This helps make things clear for all, avoiding confusion or errors. For an instance - whether and when the product/service was delivered/executed/provided. 

If yes, was it on time, what was the condition, is there anything pending/left from the previous milestone for later, etc. 

Everything here must be recorded, that’s why you need to have agreed upon recordkeeping practices.

Tips To Set Recordkeeping In Progress Based Contracts

Knowing what a progress-based contract is and why it's important, we now see best practices to create record-keeping practices.

Specify the nature of the business and the factors on which the progress is noted. What is it that binds the two parties and what each of them must do is to keep the agreement.

Mention the dates and times for every event being recorded. This helps avoid confusion and enables both parties to keep track of the timeline of the project as well.

If you are the client party i.e. service-taker or the buyer/customer, outline the payment-related norms for the service provider or the seller party and what happens if the same is not done on time.

Mention what happens if the contract is breached or either of the parties acts differently from what is expected. Make sure to keep this clause well-elaborated.

Sketch out the timeline specifying at what intervals of time would one deliver a product or execute service and upon what conditions. This helps have a clear image of the entire business enabling them to stay compliant while avoiding confusion.

Conclusion

Adding a record-keeping procedure within the contract might appear to be time-consuming and energy, yet it is important and must be done by all of the business parties. 

It ensures transparency of operations and/or activities binding the parties legally. 

If anyone fails to do the same, he/she may be able to hold the other party liable in court. 

In case you are starting a new business or signing up for a new deal, make sure you have a record-keeping procedure added in the contract when appropriate.

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Yoel Molina, Esq. (AKA “Mo”)

​Unforeseen events or uncontrollable circumstances lead to situations that one would have never dreamt. As a business businessperson, failing to have measures in place to deal with this can compound the matter. The onset of the COVID-19 crisis has been one such occurrence where people across the globe were forced to act in a way that is opposed to traditional norms. People were locked behind doors with workplaces shifted to the online environment.

With such uncertainties, business organizations were doomed to face serious repercussions. For organizations that recently entered into legal contracts, predicting their future course of action, the occurrence of such an event was a disaster. This is where the idea of a “Force Majeure” comes into play.

What is “Force Majeure”?

Black's Law Dictionary gives a very balanced definition to ‘force majeure’:

“An event or effect that can be neither anticipated nor controlled. It is a contractual provision allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event that the parties could not have anticipated or controlled.”

In terms of law or the contractual agreement, the addition of a “force majeure” clause within a legal contract gives both the concerning parties a temporary reprieve, allowing them to deviate from the contractual obligations in the event of a force majeure.

Events Classified As Force Majeure

As mentioned above, situations that aren't under the control of either of the parties is deemed as Force Majeure or the “Act of God Clause”

The most obvious events that fall under the same include:

Hurricane
Earthquake,
Terrorism attacks,
Wars,
Pandemics.

Instances when the region is hit by natural calamities such as a hurricane or an earthquake or events such as war or terrorist attack, neither of the parties stand the chance to abide by the contract. As a result, there arises a situation when either of them must act in a way that isn't legal as per the contract. However, as the situation is uncertain and they cannot do anything but act the way they are currently doing, the Force Majeure gives them leeway.

Things To Keep In Mind When Drafting Legal Contracts

Creating business contracts isn't something that you do without much thoughtful mind. Each and every clause added must be considered , read, and revised. Similarly,when you are adding a force majeure provision within your legal contracts be very detailed and deliberate.

The following are a few things to keep in mind before finalizing the contract with a force majeure clause.

1. Enumerate all of the events that account for a force majeure event. Depending upon the commercial understanding that both the parties have and also the nature of the contract, specify that the list of events could either be exhaustive or non-exhaustive;

2. Mention the actions that would follow by the parties for invoking the force majeure provision. This can be done by including a notice provision to remind both sides about the clause.

3. Details on the consequences that would follow the force majeure event. It is also important to mention that both parties must take all possible measures to deal with the consequences of the event.

Also, it may be a good idea to seek legal counsel to have a full understanding of the clause, , the possibility of specific events, and the consequences they might have to face.

Conclusion

Force Majeure clause, also known as an “Act of God clause”, is an efficient way to get out of a contract, as and when there occur situations that cannot be anticipated. . However, significant care must be taken when the clause is added within the contract to avoid any discrepancies.

Also, you never have to be without the support and counsel of fellow business owners if you join our entrepreneur and business Facebook group. 

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Yoel Molina, Esq. (AKA “Mo”)

​Drafting a business contract is one of the most important things to do when entering into a partnership or working together with other companies. Irrespective of whether you are the service provider or the service seeker, having a contract is a must. However, a contract isn't a document with just multiple lines but a document that requires the review of each and every clause added within given its importance.

Of all the clauses added, the installment payment agreement is one that helps you understand the payment terms. Prior knowledge of the same prevents disputes or disapproval in the future.

Not sure what an “installment payment agreement” is? Don't worry, this article will help you understand the in and out of an installment payment agreement and the best practices you should follow when creating the contract with the said clause.

What Is An Installment Payment Agreement?

An “installment payment agreement” is one where the entertaining parties clearly outline the nature of engagement between them, the manner in which goods/services are provided by one, and corresponding payments. Often it so happens that companies enter into a mutual agreement where they agree to pay for the goods/services over time. Instead of paying the entire amount in advance or after the completion of the task, the service seeker is expected to pay the fee over an expressed time period. .

This is primarily observed in contracts that have a certain timeline. In simple words, when party “A” requires the services of B after a certain period in time, the payment requirement is invoked. Subscription agreements, such as those on popular many web and mobile apps, are examples of installment payment agreements. Organizations or persons that sign up for the services on a monthly or a biweekly basis must pay accordingly.

Hence, for these kinds of contracts, it is important to have payment made pre or post the delivery. And this constitutes the installment agreement.

In technical terms, the installment agreement has all the points or the clauses adhering to the payment process. Like it could be mentioned that the payment may not be done before the delivery of the goods and quality check by the audit team on arrival or the payment shall be made before the delivery of the goods to confirm their requirement for the store. In either case, the manner and time of releasing payments is clearly mentioned.

How To Draft The Agreement?

Knowing what an installment agreement is isn’t enough. One must be aware of the specifics of the agreement, what all needs to be mentioned, and how.

The first thing to do is to enter the nature of the business. It is necessary that the contract clearly specifies how the one company will serve the other. Whether they seek services or goods monthly or on an ad hoc basis.
The next thing is the payment process.All the conditions on how and when the payment needs to be released must be added in the agreement.
Another thing to add to the agreement is the dispute resolution clause . if the payment is not released and how will this affect the course of business in the future.

Installment payment agreements are a must for businesses that work on a regular basis with the said party. This helps ensure that they all are on the same page and anything said or done is expected and understood.

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Yoel Molina, Esq. (AKA “Mo”)

​Parties entering into agreements aren't always liable to do a thing or act in a certain manner. Let's assume that the two companies, A and B, are planning to work together. If A is supposed to deliver goods to B but only after B has handed over a monetary advance, A isn't under any obligation, unless it receives the money. However, for the above to stand effective, the terms of the agreement must be clear with everything written in the best interest of both.

Keeping this as the core of the discussion, we draft this article outlining what a “condition precedent'' is and how you should set the agreement when the obligations are conditional.

What Is The Condition Precedent?

A “condition precedent” is a term that best describes an event or any condition which must pass so that the terms in a specific contract turn effective. In simple terms, it is the condition that needs to be fulfilled before imposing any obligation on the parties to act according to what has been said in the contract.

With respect to the law, the condition precedent is the stipulation outlining conditions that must be met for the successful execution of all mentioned in a contract. Business organizations often lay conditions to regulate the occurrence of activities.

Let's say, you deal in the real estate business. Every time you set out to sign a mortgage contract, it is important to first assess and determine the condition of the property. Only after the condition is met, can the parties enter into the mortgage contract.

Why Is The Contract Precedent Clause Important?

Not all contracts require you to mention condition precedent. However, the ones that have significant conditions must add a separate clause in the contract that specifically mentions the conditions and how they are implemented. This helps add transparency between the parties making it clear for all. In the event of disputes, either of the parties can bring up the contract to resolve them without any hassle.

How To Draft Contracts Effectively?

Having said that the inclusion of conditions within the contract simplifies the arrangement between the parties, what's more, important here is how the clause is added in the contract. Often, it so happens that even though the contract has conditional obligations, failure to specify them raises questions. Hence, there is the need to properly set the agreement in case of conditional obligations.

To help you with the same, here we outline a few pointers to take note of when creating the contract:

Mention The Object Of Condition

The first thing to keep track of is the object of the condition. What would cease to exist if the condition isn't fulfilled? In other words, what would come to life given that the condition is met? It is necessary that utmost care is taken when the same is added within the contract. Misinformation or incomplete information might affect the course of action in the future.

2.Specify The Condition

Make sure you are clear on what the condition is and who is expected to fulfill the same. In case there exists any tenure or duration for the fulfillment of the same, it needs to be mentioned as well. When you have everything set and written down, it becomes easier to deal with problems.

3.Breach

It is expected that if the condition isn't fulfilled, the object would cease to exist. However, it is wise to mention in the contract, the aftermath of not abiding by the condition. This helps both the parties to be on clear terms from the beginning.

Also, you never have to be without the support and counsel of fellow business owners if you join our entrepreneur and business Facebook group. 

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Yoel Molina, Esq. (AKA “Mo”)

Check our podcast on How to successfully enter into a contract

Link to the podcast

​Yoel Molina, Esq. (AKA “Mo”)

Check our podcast about How to Successfully Make an Offer!

Link to the podcast

​Yoel Molina, Esq. (AKA “Mo”)

​What Constitutes an Offer?

One particular thing about business contract law is that there must be an agreement based upon an offer and acceptance for the contract hold. What’s more, there must be some exchange of value between the two parties using the contract to make it valid. Thus, a contract is an agreement to exchange values between the party making an offer, or the offeror, and the party to whom such offer is made, or the oferee.

Let’s look a little bit closer at the offer part of a contract to see if we can add a little clarity to the topic.

A Contract’s Purpose

There are all kinds of contracts (lease, sale of goods, promise to render services). They each have a specific purpose in mind, which is expressed in the offer. So if the purpose of your contract was to secure the services of a painter to repaint your business office, an offer would have to be made and accepted. Now the question is, what are the terms of the offer? Thus, contracts need to include terms of agreement.

A Contract’s Terms of Agreement

The important thing here is that there is enough detail to make the offer and obligations it presents clear. This typically means that such terms must include some kind of material terms such as the price, type of services or goods, timeframe, and other key terms. Depending on the nature of the contract, terms may include a great many other things.

Valuable Considerations

What’s more, a contract offer must have a consideration to hold. If you were to offer the painter $10,000 extra dollars when they finished on top of the amount you already agreed to pay in the contract, you couldn’t be contractually obligated to pay that extra without any consideration.

However, if you agreed to pay the extra $10,000 if the painter finished two weeks early and this was added to the contract, it would hold because of the valuable consideration of the expedited turnaround time.

A Party’s Capacity to Accept

Another legal consideration to an offer in a contract is what is known legally as “capacity.” That is, the person signing the contract must have legal authority over that which they sign for it to hold. This means that not just anyone can sign a contract for a company, but someone with the authority to do so.

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Yoel Molina, Esq. (AKA “Mo”)

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