Business Law | Minnesota Contracts: The Elements
On February 4, 2018, Minnesota will play host to the largest televised event of that year: Super Bowl LII. Minnesota and U.S. Bank Stadium will be on display. But behind the scenes, a complex framework of contracts for goods and services will allow millions of dollars in value to change hands in an orderly, predicable way. But where there are high volumes of contracts, there are also breaches of contract. One party fails to pay. Another party fails to deliver goods or services. A non-party to the contract takes the money or destroys the goods before they can be delivered. A host of things can go wrong.
When things go wrong, having a strong contract is important. This article outlines some of the basic elements of a solid business contract.
The parties to the contract should be identified by legal name, home state and type of entity (for example, The Acme Corporation, a Minnesota corporation). Most businesses that operate in Minnesota are required to register with the Minnesota Secretary of State, and information about them is available on the Minnesota Secretary of State website at http://mblsportal.sos.state.mn.us.
The dates that the contract will start and end should be listed in the contract.
The contract should include a detailed description of the goods or services to be provided, to ensure that the parties have the same thing in mind, and to provide a basis for enforcement of the agreement.
Time for Performance
The contract should describe the time for delivery of the goods or services. The association may wish to specify that “time is of the essence.” The vendor may wish to include a “force majeure” provision that excuses delay caused by circumstances outside its control.
The contract should state the price for the goods or services. The contract should identify any equipment or materials that the association must provide, and any expenses that will be passed on to the association.
Billing and Payment Terms
The contract should establish a process for billing and payment. The association may wish to require detailed invoices. Any late payment fees or interest charges must be described in the contract.
Insurance and Indemnification
The contract should specify the types and amounts of insurance that are required. Many contracts include indemnification provisions regarding personal injury or property damage caused by negligence.
Many contracts provide warranties for goods or services. Minnesota Statutes may establish warranties even if they are not mentioned in the contract.
The contract should describe the remedies of each party if the other party fails to perform its obligations (known as a “breach” or “default”). Many contracts require written notice of a breach and an opportunity to cure (correct) the breach within a specified period of time before remedies can be imposed. Remedies might include the right to withhold payment, the right to withhold goods or services, the right to sue for specific performance (to require the other party to perform its obligations), the right to sue for damages (monetary compensation), or the right to terminate the contract. Remedies might include “liquidated damages,” a specific amount that a party agrees to pay if they breach the contract, based on an estimate of the actual damages that would result from a breach. A contract also may provide that a party that breaches the contract will be responsible for the other party’s attorneys’ fees and costs of enforcement.
The contract should state the address for notice to each party, the method for giving notice (such as by personal delivery, mail, express courier or fax) and the time when notice is effective (such as three days after deposit in the mail).
Most contracts provide that they can be amended only by a written document signed by both parties.
The general rule is that contracts are freely assignable (transferable). One or both parties may wish to provide that the other party cannot assign the contract without their prior written consent.
Many contracts give either party the right to terminate if the other party breaches the contract and fails to cure the default within the specified time. Some contracts also allow a party to terminate for convenience. Termination clauses generally state how many days’ notice is required prior to termination, and what rights and obligations the parties will have if the contract is terminated.
The information in this article is general information and is not legal advice regarding action to be taken in any matter, which may vary depending on the circumstances. Associations, management companies and vendors should consult with their attorneys regarding contracts for particular transactions.
To learn more, or to discuss contract preparation with one of our attorneys, please contact us at 952-432-3136 or online through this link.