ALI-ABA Course of Study Legal Issues in Museum Administration

Transcription

1 1 ALI-ABA Course of Study Legal Issues in Museum Administration Cosponsored by The Smithsonian Institution with the cooperation of the American Association of Museums April 2-4, 2008 Scottsdale, Arizona An Introduction to Contracts, Licensing, and Other Topics To Be Further Presented By Christy L. E. Hubbard Lewis & Roca LLP Phoenix, Arizona and Connie J. Mableson Dodge, Anderson, Mableson, Steiner, Jones & Horowitz, Ltd. Phoenix, Arizona

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3 3 An Introduction to Contracts, Licensing, and Other Topics to be Further Presented Christy L.E. Hubbard & Connie J. Mableson I. Introduction The purpose of this Introduction is to provide a basic introduction to Contracts, Licenses, and other Topics that will be the subject of the presentations to follow. The intent of these materials is to provide a basic understanding of certain legal principles and ideas that museum professionals routinely encounter. A look into the evolving world of electronic media and its legal import to museum professionals is also provided by way of defining terms that only now are emerging in the daily vernacular of the museum professional. II. Contracts A. Background. A contract is a legally enforceable agreement between two or more parties that creates an obligation to do or not do particular things. The term "party" can mean an individual person, organization, company, or corporation. No matter whom the parties are, contracts almost always contain the following essential elements: Parties who are competent to enter into a contract. For example, a mentally disabled person could not enter into a contract. Minors can enter into contracts, but can void them in most cases before they reach majority age. Mutual agreement by all the parties; i.e., all parties have a meeting of the minds on a specific subject. Each party either promises to perform an act that the party is not legally required to perform, or promises to abstain from performing an act that it is legally entitled to perform. B. Entering the Contract. A contract arises when there is an offer, acceptance of that offer, and sufficient consideration to make the contract valid, to-wit: An offer allows the person or business to whom the offer is made to reasonably expect that the offering party is willing to be bound by the offer on the terms proposed. The terms of an offer must be definite and certain. An acceptance is a clear expression of the accepting party s agreement to the terms of the offer. Consideration is a legal term given to the bargained-for exchange between the parties to the contract - something of some value passing from one party to the other. Each party to the contract will gain some benefit from the agreement, and will incur some obligation in exchange for that benefit. C. Types of Contracts. The law recognizes contracts that arise in a number of different ways: 1

4 4 Bilateral contract is the type of agreement most people think of as a traditional contract - a mutual exchange of promises among the parties. In a bilateral contract, each party may be considered as both making a promise, and being the beneficiary of a promise. Unilateral contract is one in which the offer requests performance rather than a promise from the person accepting the offer. A unilateral contract is formed when the requested act is complete. A classic example of a unilateral contract is a "reward" advertisement, offering payment of money in exchange for information or the return of something of value. Express contract is formed by explicit written or spoken language, expressing the agreement and its terms. Implied contract is formed by behavior of the parties that clearly shows an intent to enter into an agreement, even if no obvious offer and/or acceptance were clearly expressed in words or writing. D. Breach and Termination. A contract can expire naturally based on the term of the agreement or because each party has performed its obligations and received its consideration. Contracts can also be terminated, either by the terms of the agreement, which may detail each party s rights under the contract, and/or for breach of the agreement. A breach occurs when a party fails to perform a duty assigned to it in the contract. There are different types of breaches. Minor or Immaterial Breaches. These are instances where a party fails to perform an obligation, but the obligation is minor or the consequence of the breach is inconsequential to the heart of the deal. For example, if a non-critical status report is sent by instead of by regular mail, this is likely a minor breach of the contract and no damages are likely to arise. It is unlikely the non-breaching party would have the right to terminate for this minor indiscretion. Material Breach. A material breach is a failure to perform a key term of a contract usually one that goes to the heart of the agreement, such as payment of money due or the performance of the services requested. Parties often specify in writing which types of breach will be considered material. Many parties will designate a cure period in which the defaulting party must cure the material breach, or the non-defaulting party has the right to terminate the contract. A party can sue for damages, specific performance or an injunction in the event of a material breach. Anticipatory Breach. An anticipatory breach is one where a party has not yet defaulted on its duty to perform, but it has unequivocally stated that it will default or the fact of the default is inevitable. An anticipatory breach allows the non-breaching party to act as if the breach has already occurred and to seek its remedies in the contract. 2

5 5 E. Contract Remedies. The primary remedies for contract breaches are damages, injunctions and specific performance. Many parties will specify in writing the remedies available in the event of breach. It is also customary for parties to specifically limit the total dollar amount for which they will be liable. Compensatory Damages. Compensatory damages are damages that try to compensate the non-breaching party for its losses. Direct damages rectify losses directly resulting from the breach. For example, if the breaching party failed to pay a trademark renewal fee and the non-breaching party had to pay it, the cost of the renewal fee would be the direct damages. Consequential damages are those that are indirectly tied to the breach, such as lost profits. Consequential damages must be foreseeable to be compensable. Liquidated Damages. Liquidated damages are provisions that specify what amounts of money will be owed to the non-breaching party in the event of certain breaches. To be enforceable in most states, liquidated damages must be a fair estimate of the damages that are likely to occur and cannot be punitive. Nominal Damages. Nominal damages are awards for small dollar amounts (sometimes as little as $1) that are usually sought to establish a record of which party was and was not at fault. Punitive Damages. Punitive damages are damages set at an amount to punish the breaching party. Punitive damages are typically received in tort cases, but are fairly rare in contract cases except in extreme cases of fraud. Injunctions. An injunction is a court order prohibiting a party from doing something (e.g. continuing to use an infringing trademark or continuing to sell infringing art). Injunctions can be issued as a temporary restraining order (typically issued on a short-term emergency basis and sometimes without notice to the other party), as a preliminary injunction (typically issued at the beginning of a case before a trial on the merits has occurred) or as a permanent injunction (typically issued at the end of a case after the merits of the matter have been determined). Specific Performance. Specific Performance is a court order requiring a party to perform an obligation in a contract. For example, a court may order that the seller of real estate transfer title to the purchaser of the real estate. Courts will almost never require the specific performance of a personal service contract (e.g. the performance of a live concert, the creation of a new work of art), but it will award damages where the person breaches his/her contract by refusing to perform. III. Licenses 3