California Business Lawyer Blog

Undue influence (as a term in jurisprudence) is an equitable doctrine that involves one person taking advantage of a position of power over another person. It is where free will to bargain is not possible says California Business Lawyer Steven C. Peck.

Undue influence in contract law:
If undue influence is proved in a contract, in U.S. law, the contract is voidable by the innocent party, and the remedy is rescission. There are two categories to consider:

Actual undue influence:
An innocent party may also seek to have a contract set aside for actual undue influence, where there is no presumption of undue influence, but there is evidence that the power was unbalanced at the time of the signing of the contract.

Undue influence in probate law:
"Undue influence" is the most common ground for will contests and are often accompanied by a capacity challenge. In probate law, it is generally defined as a testator's loss of free agency regarding property disposition through contemporaneous psychological domination by an advisor which results in an excessive benefit to the advisor. It is important to note that "undue influence" is only an issue when the advisor is benefiting, not when advisor is getting a benefit for someone else; in that case it would be considered fraud. In litigation most jurisdictions place the burden of proving undue influence on the party challenging the will.

Continue reading "What is Considered The Basis of Undue Influence?" »

Liquidated damages (also referred to as liquidated and ascertained damages) are damages whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach (e.g., late performance).

When damages are not predetermined/assessed in advance, then the amount recoverable is said to be 'at large' (to be agreed or determined by a court or tribunal in the event of breach) says California Business Attorney Steven C. Peck.

At common law, a liquidated damages clause will not be enforced if its purpose is to punish the wrongdoer/party in breach rather than to compensate the injured party (in which case it is referred to as a penal or penalty clause). One reason for this is that the enforcement of the term would, in effect, require an equitable order of specific performance. However, courts sitting in equity will seek to achieve a fair result and will not enforce a term that will lead to the unjust enrichment of the enforcing party.

In order for a liquidated damages clause to be upheld, two conditions must be met. First, the amount of the damages identified must roughly approximate the damages likely to fall upon the party seeking the benefit of the term. Second, the damages must be sufficiently certain at the time the contract is made that such a clause will likely save both parties the future difficulty of estimating damages. Damages that are sufficiently uncertain may be referred to as unliquidated damages, and may be so categorized because they are not mathematically calculable or are subject to a contingency which makes the amount of damages uncertain.

Continue reading "How Does A Business Determine Liquidated Damages?" »

Breach of contract is a legal concept 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. If the party does not fulfill his contractual promise, or has given information to the other party that he will not perform his duty as mentioned in the contract or if by his action and conduct he seems to be unable to perform the contract, he is said to breach the contract.

Minor breaches:
A minor breach, a partial breach or an immaterial breach, occurs when the non-breaching party is unentitled to an order for performance of its obligations, but only to collect the actual amount of their damages. For example, suppose a homeowner hires a contractor to install new plumbing and insists that the pipes, which will ultimately be sealed behind the walls, be red. The contractor instead uses blue pipes that function just as well. Although the contractor breached the literal terms of the contract, the homeowner can only recover the amount of his damages. Generally, this means the difference in value between the red pipe and the blue pipe. Since the pipes are identical value, the difference is zero; therefore, there are no damages and the homeowner receives nothing.

Material breach:
A material breach is any failure to perform that permits the other party to the contract to either compel performance, or collect damages because of the breach. If the contractor in the above example had been instructed to use copper pipes, and instead used iron pipes which would not last as long as the copper pipes would have, the homeowner can recover the cost of actually correcting the breach - taking out the iron pipes and replacing them with copper pipes.

As with nearly everything in the law, there are exceptions to this. Legal scholars and courts often state that the owner of a house whose pipes are not the specified grade or quality (a typical hypothetical example) will not be able to recover the cost of replacing the pipes for the following reasons:

1. Economic waste. The law does not favor tearing down or destroying something that is valuable (almost anything with value is "valuable"). In this case, significant destruction of the house would be required to completely replace the pipes, and so the law is hesitant to enforce damages of that nature.[citation needed]

2. Pricing in. In most cases of breach, a party to the contract simply fails to perform one or more terms. In those cases, the breaching party should have already considered the cost to perform those terms and thus "keeps" that cost when they do not perform. That party should not be entitled to keep that savings. However, in the pipe example the contractor never considered the cost of tearing down a house to fix the pipes, and so it is not reasonable to expect them to pay damages of that nature.[citation needed]

The result is that most homeowners will not collect damages that will compensate them for replacing the pipe, but rather collect damages that compensate them for the loss of value in the house. For example, say the house is worth $125,000 with copper and $120,000 with iron pipes. The homeowner would be able to collect the $5,000 difference, and nothing more.

The Restatement (Second) of Contracts lists the following criteria to determine whether a specific failure constitutes a breach:

In determining whether a failure to render or to offer performance is material, the following circumstances are significant: (a) the extent to which the injured party will be deprived of the benefit which he reasonably expected; (b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived; (c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture; (d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances; (e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.

Fundamental breach:
A fundamental breach (or repudiatory breach) is a breach so fundamental that it permits the aggrieved party to terminate performance of the contract, in addition to entitling that party to sue for damages.

Anticipatory breach:
A breach by anticipatory repudiation (or simply anticipatory breach) is an unequivocal indication that the party will not perform when performance is due, or a situation in which future non-performance is inevitable. An anticipatory breach gives the non-breaching party the option to treat such a breach as immediate, and, if repudiatory, to terminate the contract and sue for damages (without waiting for the breach to actually take place).

Limits on Remedies and Damages:
Typically, the judicial remedy for breach of contract is monetary damages. See damages. Where the failure to perform cannot be adequately redressed by money damage, the court may enter an equity decree awarding an injunction or specific performance.

The aggrieved person has a duty to mitigate or reduce damages by reasonable means. Liquidated Damages may be limited to a specific amount. In the United States, punitive damages are generally not awarded for breach of contract but may be awarded for other causes of action in a lawsuit. Limitation of Liability (Exculpatory) clauses. [Private agreement is permissible.] [Invalid when public interest is involved and there is willful conduct or gross negligence.]

Continue reading "The Breach Of Contract: The Inability Or Failure To Fulfill The Promise" »

The major difference between a corporation being a C corporation or an S corporation is that S corporations use the pass-through taxation that partnerships use, while C corporations are subject to double taxation says Van Nuys, California Business Lawyer Steven C. Peck.

If this is an issue you are considering, you should meet with an business attorney and/or a tax advisor so that you can figure out what works best for your situation. Also, you should remember that this decision is not a permanent one, so if you initially elect to set your corporation up as an S corporation, you can always change it over to a C corporation later. In addition, if you are giving serious consideration to an S corporation because of the pass-through taxation, you should also consider setting up your business as an LLC, which also generally has pass-through taxation indicates Los Angeles Buisness Lawyer Steven C. Peck.

Continue reading "Should I Set Up a C Corporation Or An S corporation?" »

Gossiping is many people's favorite pass time. They just cannot stop talking about everybody else's life. If they come to know about somebody else's secret, they have to discuss it with their daily gossip partners. But imagine, if someone ever gets charged with criminal offense for leaking out a secret? You must be wondering what is the connection between gossiping and confidentiality agreement. Well, Confidentiality agreement came in to existence, so that, certain secrets or confidential informations are not leaked out.

As the name suggests, confidentiality agreement is signed when, parties involved in the contract do not want to disclose the information to the third party. It is generally signed between individuals, companies, corporations, societies, etc. who want to share each other's knowledge, information, business strategies, trade secrets, or any other confidential information. Any third party is restricted from accessing this information. Within a contract period, if any of the party discloses confidential information to the party outside the contract, it is considered a crime, and is liable to punishment. Confidentiality agreement is also known as, non disclosure agreement. Confidentiality agreement can be unilateral, where only one party shares information with another and wants to keep it confidential. Other type of confidential agreement is mutual agreement, wherein, both the parties share confidential information. The agreement is essentially signed by the lawyers of respective companies. Below given is a confidentiality agreement template and example, that will explain to you what confidentiality agreement is all about.

Suppose, a company manufactures a popular cola drink. There is one more rival company in to cola manufacturing. They both decide to come together and share each other's cola drink ingredients and marketing strategies hoping that this may improve the sales of their cola drink, fetching them more revenues and profits. This would be beneficial to both the companies to establish their monopoly in the market. But, if either of the company, shares the other company's secret with a third cola manufacturing company, then the victim company may have to suffer severe losses. In order to avoid this, both the companies sign the confidentiality agreement, which is a legal document.

In a general partnership, each partner has the ability to take actions which can legally bind the partnership and, thus, the other partners themselves (even if those other partners have not been consulted or given their approval). In other words, each partner has full authority to exercise management and control of the partnership. When owners do not want to have control fully and equally shared like this, they can change the management structure through the terms of the partnership agreement. However, there are certain duties and obligations that cannot be changed. For example, in all partnerships, the individual partners are always entitled to all information about the business, such as financial information, details about transactions, etc. Similarly, because there is a fiduciary relationship between the partners, they always owe the other partners a duty of good faith, a duty of loyalty, and a duty of fairness in dealing with transactions relating to the partnership (in other words - you can't screw over your partners).

As for the actual details about controlling and running a partnership, things can generally be as simple as you want them to be. While all partners in a general partnership (and all general partners in a limited partnership) have equal ability to conduct business, the major decisions are usually made by having the partners vote. While the votes may be based on the number of partners, most partnerships instead base them on partnership interests. Thus, if there are five partners, but one has a 60% interest in the partnership, he is essentially the controlling partner of the business. However, instead of this so-called "owner management," the partners can adopt a structure more like a corporation, appointing a managing partner or a president, vice-president, etc.

Partnerships do not generally have to hold any form of regular meetings, like corporations. Thus, the partners can simply hold meetings when and if they feel there are important things to discuss or vote on. Similarly, unlike corporations, partnerships generally do not have to file any annual reports with the state, listing the details of the business. As a result, there are not really any business documents which a partnership should maintain aside from those which it decides are useful and necessary for running a business. However, while not necessary, partnerships should consider keeping a partner ledger.

Continue reading "How Are General Partnerships Controlled and Managed?" »

There are no formal procedure requirements which sole proprietorships have to follow, which is why they are these easiest type of business to run. Partnerships and LLCs have some limited formalities they have to file, as mandated by state law, although there are generally no requirements for things like annual meetings. Most states have very strict formalities which corporations must follow, including the fact that they generally must hold annual meetings of their shareholders and directors.

Continue reading "What Business Types Have To Follow Strict Procedural Requirements?" »

Partners in a partnership are fiduciaries to each other. This relationship means that they owe each other, and the business, certain basic duties. For example, they must be truthful to each other regarding anything relating to the partnership itself, property owned by the partnership and the other partners. Thus, it would be a violation of these duties if a partner embezzled money from the business, misused or abused property belonging to the partnership, or tried to take advantage of another partner. Related to these fiduciary duties, the partners also have a duty of loyalty, which means that they must remain loyal to the partnership. Thus, a partner cannot do business with another company which is at odds with the partnership, nor can he or she conduct any side business which places them in competition with the business of the partnership itself.

Continue reading "Partners In a Business Partnership Are Fiduciaries to One Another" »

There are times when a business or entrepreneur would benefit from sharing confidential and valuable information with a third party. Yet, some business owners and entrepreneurs hesitate because they are concerned about what the third party will do with the information. They do not want the confidential information shared with others or used by the third party for that party's own benefit. The law recognizes the important business interest of keeping certain information confidential and the need to consult with third parties in order to make a business more profitable or to allow a new idea to be implemented. A confidentiality or nondisclosure agreement can allow the business or entrepreneur to share information with a third party and be confident that it the information will remain classified says California Business Lawyer Steven C. Peck.

When to Use a Confidentiality Agreement or Nondisclosure Agreement:
Confidentiality and nondisclosure agreements can be used in many business situations. Some common situations where these types of agreements may be useful include when:
You are soliciting investors, partners or contractors for an invention or new business idea;
You are negotiating with a potential buyer of your business, invention or idea; or
A contractor or employee will have access to confidential data that could be financially detrimental to your business should it be disclosed.
What to Include in a Confidentiality or Nondisclosure Agreement
There are two types of confidentiality or nondisclosure agreements.
One type is called a unilateral agreement where the party presenting the agreement is requesting that the other party keep the information confidential but does not require itself to maintain confidentiality. The other type is called a mutual agreement where both sides agree to maintain confidentiality.
In order to enforce a confidentiality or nondisclosure agreement it is important that the agreement be in writing. When you are drafting your agreement, it is useful to consider whether the following elements should be included:
A description of the confidential information so that both parties understand the scope of the agreement;
A description of why the confidential information is being shared in this case and how it may be used. Generally, parties receiving confidential information must use it only for the limited purpose of the contract and not in any other way;
An agreement by the parties that the information will not be disclosed during the term of the contract; and
Other provisions as are necessary to the needs of the parties to the confidentiality or nondisclosure agreement.
Most confidentiality and nondisclosure agreements are in writing, dated and signed by both parties. While state law may allow for oral contracts, it is important for business contracts to be in writing in case of a future dispute. It is particularly important in narrowly drafted confidentiality agreements indicates Los Angeles Business Lawyer Steven C. Peck.
Confidentiality and nondisclosure agreements fulfill an important business objective. They allow businesses to obtain financing, outsource certain jobs to experts and to pursue selling their business with the security that important business secrets will remain confidential and will not be used to compete with their own business interests.

An Internal Revenue Service watchdog warned recently that the paperwork burdens on small businesses may outweigh the benefit of tax collections generated as part of the new health-care law.

Starting in 2012, about 40 million businesses, charities and other entities will be required to report to the IRS payments they make to suppliers and service providers, the IRS Taxpayer Advocate Service said in its midyear report to Congress says California Business Attorney Steven C. Peck.

The reporting regime is aimed at giving the IRS more information to help it collect taxes from the vendors. But the report said it could disrupt commerce and that IRS systems might not be equipped to make much use of the information anyway.

Businesses are already required to report payments to noncorporate service providers that exceed $600 in a given year.

The health-care law expanded that to cover incorporated service providers, and also vendors of goods. That means that a self-employed person who pays the same vendor more than $600 for office supplies, equipment or consulting services in the same year must now generate a 1099 form for that vendor and send it to the IRS.

The IRS has announced that businesses wouldn't have to report payments made by credit card, as those payments will be picked up by a separate reporting regime.

That isn't much comfort, as many transactions within a single industry -- like the payments between manufacturers and distributor -- are handled by check.

The Taxpayers advocate, which represents a variety of industries from electricians to toy makers, has fought the new requirements.

The rules could well push more small businesses toward making payments by credit card in order to avoid the extra paperwork, "The credit-card companies get a major windfall out of this."

For instance, the law requires that the vendor provide its business customers with a taxpayer identification number, which the customer must then include on the 1099 form. If the vendor doesn't provide an ID number, the business is required to back-up withhold, on behalf of the IRS, 28% of the purchase price.

"A vendor may simply refuse to sell goods to any purchaser that refuses to pay the full purchase price. Such an outcome could significantly impair the normal course of commerce,"

In addition, she said large company vendors will have an advantage over small firms because they may offer to keep track of payments for their customers to help meet the IRS requirement.

The new reporting requirements were included in the health-care bill to help offset the cost of new health-insurance subsidies. They were estimated to raise $17 billion for government coffers over the next 10 years.

The information-reporting requirement is one of two main areas of concern on which the Taxpayer Advocate said it will focus during the coming year.

Writen by Martin Vaughan at martin.vaughan@dowjones.com
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved

If you have decided to start up a business, you are require to include an articles of association within your documents. Once you have established the name and team members, you must be sure to take care of the administrative items. Prior to operating a business, you are required to complete a few forms, one of those items needed to start up a business are the Articles of Association.

What is the Article of Association?
The Articles of Association is a contractual document, required by law. It details the owner, its board members and finances. The document spells out the roles and responsibilities of its members, position terms of board members, voting rights, the guidelines for how meetings are conducted and how often the board meets.

It also documents general information about the business such as the name and physical location and the purpose of the company. In addition, the articles of association must include the shares of the company, the value, and how it is split between the board. Overall, the article of association spells out who, what, why, financial reconciliation, and dissolution process of a company. It works as a blueprint of the business.

Continue reading "The Articles of Association In A Business Startup" »

Whether you are looking to start a business anywhere in Los Angeles, reorganize an existing business, or simply need advice concerning day-to-day business transactions, you want a law firm or experienced corporate law attorney in Los Angeles who will be able to give you and your corporate legal concerns as much attention and effort as possible. Corporate law attorney understands that in business, time is real money. They respect both their clients' time and money and are energetic in their efforts to provide the most efficient, economical, and successful legal services. The most successful companies not only start out with quality financial guidance, but also with proper legal counsel from a qualified and experienced corporate law attorney.

General Business and Corporate Law Services:

A corporate law attorney is eager to put his knowledge and proficiency to work for you with the following practice matters:

Entity Formation
Acquisitions and Dispositions
General Business Contracts
Attentive- Proficient- Tenacious

When you need legal assistance, contact California Business business Lawyer Steven C. Peck. He has helped countless families,individuals, and business owners finding expert solutions to the legal problems clients face.

They are experts and provide a comprehensive range of services to their business clients ranging from:

Preparation of agreements, filing and publication requirements
Sale and purchase of Businesses
Mergers,acquisitions, and joint corporate ventures
Corporate Dissolution
Business succession planning
Advising clients in businesses recapitalizations, redemptions, reorganizations, and formation.
Legal Contract Preparation
Handling all documentation, filing and publication requirements for the creation of corporations
Help in determining which entity will best suit your needs.
Reasons for hiring Corporate Law Attorney for Business Majors

Attorneys do their job by having a firm grasp of Federal, State, and Local laws, and they use their specialized knowledge to help their clients' cases. The occupation of lawyers, or attorneys, is a professional field that will always be needed. If you are facing litigation, you need to hire a qualified corporate law attorney. Even if you aren't faced with litigation, an experienced corporate law attorney can advise and assist you in drafting business plans, fundamental business formation and structuring financing provisions.

The risks and costs of business litigation later down the road are too great to not engage a business litigation attorney before you enter into entity formation, or general business contracts legal formalities. Business law attorneys can help you with all of your business litigation needs. They are committed to working closely with you to come up with solutions that achieve your objectives in an efficient and cost-effective manner. They respect the value of your time and money, and are expert in handling your transactions correctly the first time, alleviating any errors.

Contact Steven Peck's Premier Legal toll free at 1.866.999.9085 to talk to an experienced California Business Attorney and visit us on-line at www.premierlegal.org.

In many of our activities, we have already encountered contracts. The contract contains the details agreed upon by the parties involved in the project or any agreement. A contract is a legal document and can be used as evidence in the court. That is why a contract should be well made and the details in them should be clear and complete. Both parties should also be able to understand what is written in the contract. If you wish to make a contract or you are about to sign a contract, it is best if you consult a lawyer. It may mean more expense for your part but it will also save you from any problems in case the contract is faulty. But either way, it is still best that we know what a contact must have says California Business Attorney Steven C. Peck.

A basic contract usually has five elements in it and we will discuss each of it in details.

The work to be done for the project should be clearly stated in the contract. The work the contractor would do and will not do should be indicated in the contract. The work to be accomplished should be clear to both parties to prevent any misunderstanding.

The time limit of the project is also a very important aspect. In construction projects where the time is of essence, the contractor should be able to meet with the deadlines. In some contracts, a penalty is usually included in the clause if the contractor will not be able to meet the deadline and a bonus is also given if the project is ready before the deadline.

The payment clause of the issue tackles the monetary issue in the contract. Some contracts are paid in a fixed price while others are paid by computing the cost of materials and the time spent on the project. The manner on how the payment is to be done (either monthly or weekly or so forth) and when the payments should be made are also specified on the contract. The arrangement of the payments should be agreed by both parties to satisfy the quality of the work done.

The contract should also address any confidentiality issues and reporting of the progress of the project. The contract should state all the information that the contractor should not divulge in any circumstances. The information should also be kept just between the contractor and the buyer. Information should not be divulged for the buyer's benefit unless you discover it to be illegal and proper authority should be contacted. The progress on the project can also be reported to the buyer only unless stated otherwise in the contract.

Warranty and subcontractors on any project made is also indicated in the contract. Warranties are also just valid for only a year. This is to ensure that any services done will be of high quality and done in a timely manner. If a subcontractor will be needed for the project, the buyer should know of it and have a list of the subcontractors. The buyer must first agree on the subcontractors before she signs the contract and then the project can be a closed deal!

This is very similar to the notion of piercing the corporate veil (aside from certain technical distinctions that are being ignored for the purpose of this discussion). Owners of corporations (i.e., its shareholders) are generally not personally liable for debts, losses and liabilities of the business itself, because of limited liability. However, if those owners have acted in a way where their business is really just a shell, and not an entirely separate legal entity, a court may decide that the business is simply an alter ego, meaning the owners should be held personally liable because of their wrongful acts states California Business Attorney Steven C. Peck.

There are many things that a court will look at in determining whether alter ego liability should be applied. Typical factors include (but are not limited to) whether the company kept its own records, whether there were shares (for a corporation) or units (for an LLC) that were actually issued, whether the owners co-mingled their finances with the business entity, whether there were actually corporate directors or LLC managers running the business, how legal formalities were followed and whether the owners used the business for personal purposes. It is often a case-by-case situation, and the key here is that you should take every precaution to run your business in full compliance with the legally required formalities and use the business in a proper way in order to avoid such alter ego liability indicates Los Angeles Business Lawyer Steven C. Peck who may be contacted toll free at 1.866.999.9085.

Small businesses are incorporating, Incorporating yourself has gained popularity and is exceedingly much more advantageous for those looking to incorporate. businesses like real estate agents, mortgage brokers, online marketing, eBay, are looking to corporations and limited liability companies because of the benefits that are realized when owning a company.

We are going to talk about the benefits of incorporating and how it's not only reserved for big business andabout entrepreneurs looking to gain an edge on the competition by forming a business entity and gaining all possible advantages through incorporation says California Small Business Law Attorney Steven C. Peck.

Liability protection. One of the primary purposes of forming a business entity is to separate yourself personally, and your personal assets from the business. By creating separation, you protect yourself in the event your new company fails, and will not be held liable personally for any liability that was in the business name, but will not be held personally liable for the debt in most instances, various exceptions to individual responsibility for corporate debt could arise depending on the facts and the circumstances indicates California Business Attorney Steven C. Peck.

Taxes. There's no secret that business entities, LLC's and corporations have the ability to provide tax advantages. The reason for this is this country thrives when small business thrives. and when small business is earning money,businesses will hire more people. 70% of all businesses are small businesses. The government is consistently stimulating the small business industry. It is believed that small business will always benefit from tax breaks because of its importance in maintaining a thriving economy. Owning a business entity and understanding its tax advantages, tax breaks, can be a extremely useful benefit to even the smallest of small business owners.

Continue reading "Business Incorporation and its Many Advantages" »