7 Principles of Contract Law You Should Understand Before Signing
You are offered a publishing contract! Every writer works towards the success of landing a publishing contract. You’ve received advice on how to write well.
What about how to execute a contract successfully? Do not sign your contract without understanding the principles of contract law.
Keep reading for a crash course in seven of the principles of contract law before you sign your next publishing contract.
Principles of Contract Law
A contract is an agreement between two or more parties where each of the parties agrees to do or refrain from doing an act either now or in the future.
There are two main areas of the principles of contract law. Common law, which covers contracts between people and contracts for services. The Uniform Commercial Code (UCC) covers contracts between merchants for goods.
When you sign a contract as a writer or related to publishing, your contract will follow common law rules. We are going to focus on the common law below.
1. Formation
A contract forms when two or more parties agree to do or not do something either immediately or at some point in the future. To have an agreement there must be an offer and an acceptance.
There must be a meeting of the minds. Both parties must agree to the same terms for there to be a contract.
The publishing company is the offeror. You are the offeree. This is the offer and acceptance. Both parts need to happen for a contract to be formed.
A bilateral contract is where both parties promise to do something. A unilateral contract is where one party makes a promise, and the other party performs.
Consideration is the value you are giving to the contract. The publisher is giving you money. You are giving your writing.
Certain types of contracts must be formalized in writing. Sale of land, promise to pay a debt, marriage, items over $500, and contracts that cannot be completed within one year.
Even if your contract doesn’t fall within one of these categories, it is smart to still get your agreement in writing.
2. Canceling the Contract
If one or both parties were mistaken as to a material fact when they signed the contract, they may be able to cancel it. If one party knew the other was mistaken, then the court uses the mistaken party’s understanding of the contract.
If a party is forced into a contract under what is called duress, they can void the contract. Duress must be either physical or economic.
The contract may be voidable if one of the parties knowingly misleads the other party. If at any point your contract becomes illegal under the law, then the contract is no longer enforceable.
3. Breach of Contract
A material breach is when a party breaches a specific condition of the contract, otherwise, it is a minor breach. Minor breaches can only be compensated with actual damages.
Material breaches can be compensated for damages beyond actual damage such as economic waste or lost profit. A fundamental breach lets the non-breaching party cancel the whole contract.
Anticipatory repudiation happens when one party gives the other the impression they do not intend to perform under the contract. Once you think the other party doesn’t intend to perform, you can demand performance.
After you make demand and receive no reassurances, you may cancel the contract. You are technically breaching the contract, but the other party is the one at fault.
4. Third Parties
Sometimes a contract is affected by a third party. This is tortious interference. Typical tortious interference requires there is be an existence of a contractual relationship. The third party knows of the contract.
The third party is responsible for one party to the contract to breach the contract. The third party doesn’t have a privilege to induce the breach.
The contract was actually breached. The non-breaching party suffered damages from the breach.
If a third party satisfies these elements you have a right to seek damages against the third party.
5. Specific Performance
Specific performance is a limited remedy for a breach of contract. It is considered an equity remedy.
It is used when monetary damages are not adequate. Specific performance is used when the item contracted is unique, such as land.
It is generally not used for service contracts. Courts consider forcing someone to perform against their will involuntary servitude.
It can be used to prevent someone from performing. This is common for non compete contracts.
6. Arbitration
Arbitration is a method of alternative dispute resolution. It’s a way to resolve disputes without having to go to court.
Parties will agree to hire someone to resolve the dispute. The outcome of the arbitration is legally binding in court.
You can agree to arbitration in the event of a breach by one of the parties. This means an arbitrator will settle the dispute outside of going to court.
The benefit is you can afford expensive litigation costs. The drawback is limited discovery and potential for bias.
7. Parol Evidence Rule
Make sure everything you talk about is included in the contract. Do not sign anything until everything discussed is in the contract, no matter how small the detail.
If the court determines your contract as a final integrated version of your contract, you cannot introduce evidence outside of the contract. The exception is to show you and the other party had different understandings of the terms.
You will not be able to introduce evidence of items that are missing from the contract. The court assumes that your contract would have included the extrinsic item if you actually intended for it to be in the contract.
Sign Your Contract
Read your contract offer and look for the principles of contract law. What is their offer? Do you accept? What happens if you want to cancel the contract?
What happens if you breach the contract? The better prepared you when you sign the more likely it will be a smooth experience in the long run.
Keep reading about 5 issues authors run into that require legal support.