Types of contract.
'Contracts'... A business and lawyers best friend... and a clients worst enemy... But what exactly is a contract?...
Well, a contract is simply an agreement (with specific terms) between two or more persons in which there is a promise to do something in return for a valuable benefit known as 'consideration'.
Due to the law of contracts being the heart of most business dealings, the document is one of the three to four most significant areas of legal concern and often involves variations on circumstances and complexities.
The existence of a contract requires finding the following factual elements:
a) an offer
b) an acceptance of that offer which results in a meeting of the minds
c) a promise to perform
d) a valuable consideration (which can be a promise or payment in some form)
e) a time or event when performance must be made (meet commitments)
f) terms and conditions for performance, including fulfilling promises
g) performance.
Different forms of contract:
A unilateral contract is one in which there is a promise to pay or give other consideration in return for actual performance. (I will pay you $500 to fix my car by Thursday; the performance is fixing the car by that date).
A bilateral contract is one in which a promise is exchanged for a promise. (I promise to fix your car by Thursday and you promise to pay $500 on Thursday).
Contracts can be either written or oral, but oral contracts are more difficult to prove and in most jurisdictions the time to sue on the contract is shorter (such as two years for oral compared to four years for written). In some cases a contract can consist of several documents, such as a series of letters, orders, offers and counteroffers. There are a variety of types of contracts: "conditional" on an event occurring; "joint and several," in which several parties make a joint promise to perform, but each is responsible; "implied," in which the courts will determine there is a contract based on the circumstances.
Contracts when it comes to film and television!
When it comes to film and television, there are two forms of contract: Confidentiality and Exclusivity.
Confidentiality contracts:
A non-disclosure agreement (NDA),
Also known as a confidential disclosure agreement (CDA), confidentiality agreement (CA), secrecy agreement or proprietary information agreement (PIA) is a legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to or by third parties.
The reason one of the many names for this contract is 'secrecy agreement' is because it's a contract through which the parties agree not to disclose information covered by the agreement. An NDA creates a confidential relationship between the parties to protect any type of confidential and proprietary information or trade secrets
As such, an NDA protects nonpublic business information.
These are commonly signed when two companies, individuals, or other entities (such as partnerships, societies, etc.) are considering doing business and need to understand the processes used in each other's business for the purpose of evaluating the potential business relationship. NDAs can be "mutual", meaning both parties are restricted in their use of the materials provided, or they can restrict the use of material by a single party.
Other possibilities include an employee to sign an NDA or NDA-like agreement with an employer. In addition to this, some employment agreements will include a clause restricting employees' use and dissemination of company-owned confidential information.
A non-disclosure agreement may be unilateral or bilateral, that is it may bind only one party or multiple parties (typically two):
Bilateral NDA
A bilateral, or mutual, agreement is where both parties will be supplying information that is intended to remain secret. This type of agreement is common when businesses are considering some kind of joint venture or merger.
Unilateral NDA
A unilateral, or a one-way, agreement is where one party wants to disclose certain information to another party but needs the information to remain secret for some reason, perhaps due to secrecy requirements required to satisfy patent laws or to make sure that the other party does not take and use the disclosed information without compensating the discloser.
Some practitioners insist on a mutual NDA in all cases, to encourage the drafter to make the provisions "fair and balanced" in case the drafter's receiving-party client later ends up as a disclosing party, or vice versa. (not an uncommon occurrence)
CONTENT:
A nondisclosure agreement can protect any type of information that is not generally known.
However, nondisclosure agreements may also contain clauses that will protect the person receiving the information so that if they lawfully obtained the information through other sources they would not be obligated to keep the information secret. In other words, the nondisclosure agreement typically only requires the receiving party to maintain information in confidence when that information has been directly supplied by the disclosing party. Ironically, however, it is sometimes easier to get a receiving party to sign a simple agreement that is shorter, less complex and does not contain safety provisions protecting the receiver.
Some common issues addressed in an NDA include:
- The definition of what is confidential, i.e. the information to be held confidential. Modern NDAs will typically include a laundry list of types of items which are covered, including unpublished patent applications, know-how, schema, financial information, verbal representations, customer lists, vendor lists, business practices/strategies, etc.;
- The disclosure period - information not disclosed during the disclosure period (e.g., one year after the date of the NDA) is not deemed confidential;
- Outlining the parties to the agreement;
- The exclusions from what must be kept confidential. Typically, the restrictions on the disclosure or use of the confidential data will be invalid if:
- the recipient gained subsequent knowledge of the materials from another source;
- the recipient had prior knowledge of the materials;
- the materials are generally available to the public; or
- the materials are subject to a subpoena although many practitioners regard that fact as a category of permissible disclosure, not as a categorical exclusion from confidentiality (because court-ordered secrecy provisions may apply even in case of a subpoena). In any case, a subpoena would more likely than not override a contract of any sort;
- provisions restricting the transfer of data in violation of national security;
- the term (in years) of the confidentiality, i.e. the time period of confidentiality;
- the term (in years) the agreement is binding;
- permission to obtain ex-parte injunctive relief
- the obligations of the recipient regarding the confidential information, typically including some version of obligations:
- to use the information only for enumerated purposes;
- to disclose it only to persons with a need to know the information for those purposes;
- to use appropriate efforts (not less than reasonable efforts) to keep the information secure.
- Reasonable efforts is often defined as a standard of care relating to confidential information that is no less rigorous than that which the recipient uses to keep its own similar information secure; and
- to ensure that anyone to whom the information is disclosed further abides by obligations restricting use, restricting disclosure, and ensuring security at least as
- protective as the agreement; and types of permissible disclosure - such as those required by law or court order (many NDAs require the receiving party to give the disclosing party prompt notice of any efforts to obtain such disclosure, and possibly to cooperate with any attempt by the disclosing party to seek judicial protection for the relevant confidential information).
- The law and jurisdiction governing the parties. The parties may choose exclusive jurisdiction of a court of a country.
Exclusivity contracts:
Identification
Features
- The essential feature of an exclusivity agreement is the covenant to not engage in a particular business activity with other parties for a specified period of time. The agreement usually restricts only one of the parties. This typically occurs in vertical buyer/seller relationship where a buyer agrees to buy exclusively from the seller. Or a manufacturer could agree to ship its products through only a certain distributor. Less common is the bilateral agreement that puts conditions on both parties.
Types
- In addition to buyer/seller relationships, exclusivity agreements sometimes come into play during business acquisitions. Because there can be heated competition and competing bids for a company, an acquiring company that makes progress in negotiations can have its target sign an exclusivity agreement preventing it from entertaining other offers from competitors. Individuals may enter into an exclusivity agreement when they agree to list their house exclusively with a real estate agency.
Function
Considerations
- Within an exclusivity agreement there may be other terms, such as confidentiality, access to relevant data and conditions for termination. Once two businesses get in bed together, they may become privy to information about each other that could be valuable to the competition. But, at the same time, a certain level of cooperation might be necessary to maximize the synergy of the two companies. The exclusivity agreement can be tailored to the needs of the moment as well as future inevitabilities. Sometimes the agreement can be broken at any time, but with a penalty. In other cases it might be periodically renegotiated, or terminated upon certain conditions.
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