California Business Lawyer Blog

Agency is an area of law dealing with a contractual or quasi-contractual relationship between at least two parties in which one, the principal, allows the other, the agent, to represent her or his legal interests and to perform legal acts that bind the principal. Agency can be created in a variety of ways, such as through the grant of a power of attorney also known as a mandate in civil law jurisdictions, it can also be implied from the conduct of the parties. says California Business Attorney Steven C. Peck.
The law of agency is used in many professional areas, from contract negotiation (business management), employment procurement (i.e. modelling agencies), by financial advisors, in the buying and selling of real estate, the negotiation of entertainment and sports deals and in many day to day transactions where one person (the "agent") is allowed to stand in for another individual to fulfill their wishes. Agents can represent the interests of one party, or they may represent the interests of several, conflicting or potentially conflicting parties. In the case of such dual agency the agent must either disclose information received by one party to the other or act in a limited agency capacity to prevent a situation where the agent's loyalty to the multiple principals is compromised.

Continue reading "Agency: Allowing an Individual to Perform Legal Acts That Bind the Principal" »

Something interesting is happening in California. Anthem Insurance Company is delaying its massive insurance rate increase. Anthem insurance company has been under fire this week because they are going to invoke an average price increase of 25 percent on about 700,000 insurance customers who purchase their own coverage. For some it would be as high as 39 percent. Anthem is getting grief all the way up to the White House.

Anthem has agreed to delay implementing their rate increase from March 1 to May 1.

Insurance Commissioner of California Steve Poizner has been working with Anthem Insurance to determine if they are living up to a law that was passed in 2006. This says that an insurance company must spend 70 cents of every premium dollar on medical care.

I personally think that is whimsical says Los Angeles Business Attorney Steven C. Peck. That means your expenses and administration come out of 30 cents on the dollar. Companies can do that if the expenses go down after the first year but I sincerely doubt that 70 cents on the dollar is realistic. And that can cause this type of problem.

The commissioner has brought in an outside firm to examine the summations of Anthem. He is skeptical that they have come to the right conclusions.

If they did not live up to the law then the Commissioner can make the company reduce the rates at risk of losing their license to sell in the state.
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When you make a monetary loan, it is always a good idea to have a promissory note setting forth the terms of the loan suggests Los Angeles Business Lawyer Steven C. Peck. A promissory note is also used in real estate transactions.

A personal promissory note for a loan has many parts. It will set forth the full names and addresses of both the lender and the borrower. The amount of the loan will be stated, along with any terms of interest and the length of the loan. Payment terms will give the amount of each month/weekly/yearly payment until the loan is considered paid in full. The promissory note will also spell out remedies and actions should the loan be defaulted upon or if payments are late. Without this type of formal agreement, there is no guarantee that loaned money will be repaid to you on time, or even at all. Promissory notes protect everyone involved. They not only assure the lender a legal recourse if the loan is defaulted upon, but they protect the borrower should the lender decide to change or alter verbal terms throughout the life of the loan. Once this form is completed and endorsed, there should be no questions, confusion and difficulty with the performance of either party. Lastly, as with any other legal forms, all signatures must be notarized and/or witnessed.

Continue reading "Monetary Loan: Have a Promissory Note Drawn Up Setting Forth Its Terms" »

If you have a business partnership with one or more persons and someone wants to leave the partnership, a formal agreement is truly necessary to protect everyone involved. The technical term for this type of agreement is a dissolution, which is the change in the relationship of the partners caused by any partner ceasing to be associated with the business, and distinguishes it from the dissolution of the business itself. states California Business Lawyer Steven C. Peck.

Any time a partner leaves a business, the partnership is, in essence, dissolved. However, the remaining partner or partners may carry on business as usual after the agreement is signed. The partnership dissolution agreement should set forth terms under which the partner is leaving. It should state any property of the business which the partner is taking with him, the rights of the business to retain present customers, any monetary terms agreed upon, the right to the name of the business, and any other important key points which would allow the business to continue. It should be noted that no one can be forced to remain as a partner in the business against his or her own wishes and has the power to withdraw at any time if there is an agreement. If no agreement can be reached, the partner may not have the right to withdraw until a formal partnership dissolution agreement can be redesigned to everyone's satisfaction. Therefore, utilizing a dissolution agreement form is the best choice, so that all important areas are covered and no legal issues arise down the road indicates Los Angeles Business Attorney Steven C. Peck.

Continue reading "A Formal Agreement is Truly Necessary To Protect Everyone in a Partnership Business Dissolution" »

Although the goal of the federal bankruptcy laws is to offer a financial "fresh start" to the honest but unfortunate debtor allowing a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.

A discharge releases you from personal liability for certain specified types of debts. Discharge means you are no longer required to pay those debts. It is your 'get out of jail free card', so to speak. It is refreshing, and; relieving. And best of all, it is morally, ethically, and; legally o.k. It is your fresh start!

The discharge directs creditors to refrain from taking any form of collection action on discharged debts, including legal action and communications with you such as telephone calls, letters and personal contacts. In other words . . . hopefully in your case . . . No more worrying. When you place it in our hands, you will hopefully begin to feel release, and; begin to sleep at night, knowing that no one will harass you on the phone any longer.

Not all debts are discharged in a California bankruptcy. Although you may be relieved of personal liability some debts may continue after the discharge. For instance some liens on a property may remain after the bankruptcy case. A second trust deed; in some cases, might be discharged completely! That means, that if you have a $100,000.00 secondary lien on your home, it could be wiped off completely (this of course is on a case by case basis, and; you will need to call the law firm for an appointment to discuss your case).

A secured creditor may enforce the lien to recover the property secured by the lien. In other words, if your car is still under financing, the lender can repossess the vehicle. You may; however; reinstate the loan if you so desire in certain situations.

Other types of debt that are not dischargeable include alimony, child support, certain taxes and debts for death or personal injury caused by the debtor's operation of a motor vehicle while the debtor was intoxicated from alcohol or other substances. (Of course, all bankruptcy matters are on a case by case scenario, and; each client's matters must be discussed with the attorney in order to insure that all of the rules of bankruptcy are applied and; that the best relief possible is being given to you).

Continue reading "Dischargeability of Debt in a California Bankruptcy: Basic Principles" »

The California Supreme court in American Motorcycle v. Superior Court (1978) 20 Cal. 3d 578 reviewed the common-law right of an injured party to recover damages sustained as a result of an indivisible injury under the joint and several doctrine as codified in California Civil CodeSection 1714.

The basic tenet is that an injured party has the right to full recovery of all damages from each responaible party. The doctrine ensures that the injured party receives adequate compensation for its injuries, even if one or more of the responsible parties do not have the financial resources to pay for their share of the liability.

Continue reading "Joint and Several Liability: Basic California Business Law Concepts" »

Many of us have one, or two or maybe even three.

We get them to build credit, or earn points for vacations, but the rates and terms for many credit cards are soon changing.

Credit cards can either be your best friend, or your worst nightmare.

But if you keep an eye out, some new changes could prove to be more friendly.

Card holders beware, 22 new changes for your accounts will go into effect on February 22nd, 2010.

"Credit card companies cannot charge you a late fee unless you're 60 days or more delinquent, you usually only have 14 days to pay that bill, that will be extended to 21 days, due dates must remain the same every month, they will not allow you to go over your credit card limit." Says California Business Attorney Steven C. Peck.

The new laws are meant to protect both consumers and lenders.

Especially the debt stricken college aged student who has an average of $3100 worth of debt.

Among the many changes, new restrictions could determine how companies solicit to students, and just who can sign up for a credit card.

"If you are under the age of 21, you will have "If you are under the age of 21, you will have to have a parent or legal guardian's co-signature in order to get a credit card. For parents or guardians out there though, that info will also on your credit report, so you have to be careful about that." Says Peck.

Perhaps the most notable change involves your interest rate. Your credit card company now has 45 days to notify you of a rate change and why it's changing.

"You will somewhere in the wording of the letter they send you, you will either have the option to either call or write a letter to opt out of that rate increase. Once you opt out of that, your rate will go back down but your access to that card will close." Says California Business Lawyer Steven C. Peck.

From clearer wording on bills to other stricter rules and regulations, some think the changes will make the decision between cash or credit a little easier.

"You shouldn't over draw you account, that's just going to cost you a lot of money, they have all kinds of penalties. So, probably have a place where they actually stop and say no- it would help people prevent getting themselves in too deep." Says Los Angeles Business Attorney Peck.

Continue reading "New Credit Cards Changes Go Into Effect on February 22, 2010" »

A standard form contract (sometimes referred to as an adhesion contract or boilerplate contract) is a contract between two parties that does not allow for negotiation, i.e. take it or leave it. It is often a contract that is entered into between unequal bargaining partners, such as when an individual is given a contract by the salesperson of a multinational corporation. The consumer is in no position to negotiate the standard terms of such contracts and the company's representative often does not have the autonomy to do so says California business attorney Steven C. Peck

There is some debate on a theoretical level whether, and to what extent, courts should enforce standard form contracts. On one hand, they undeniably fulfill an important efficiency role in society. Standard form contracting reduces transaction costs substantially by precluding the need for buyers and sellers of goods and services to negotiate the many details of a sale contract each time the product is sold. On the other hand, there is the potential for inefficient, and even unjust, terms to be accepted by those signing these contracts. Such terms might be seen as unjust if they allow the seller to avoid all liability or unilaterally modify terms or terminate the contract says California Business attorney Steven C. Peck.

These terms often come in the form of, but are not limited to, forum selection clauses and mandatory arbitration clauses, which can limit or foreclose a party's access to the courts; and also liquidated damages clauses, which set a limit to the amount that can be recovered or require a party to pay a specific amount. They might be inefficient if they place the risk of a negative outcome, such as defective manufacturing, on the buyer who is not in the best position to take precautions. There are a number of reasons why such terms might be accepted:
Lengthy boilerplate terms are often in fine print and written in complicated legal language which often seems irrelevant. The prospect of a buyer finding any useful information from reading such terms is correspondingly low. Even if such information is discovered, the consumer is in no position to bargain as the contract is presented on a "take it or leave it" basis. Coupled with the often large amount of time needed to read the terms, the expected payoff from reading the contract is low and few people would be expected to read it.
Access to the full terms may be difficult or impossible before acceptance
Often the document being signed is not the full contract; the purchaser is told that the rest of the terms are in another location. This reduces the likelihood of the terms being read and in some situations, such as software license agreements, can only be read after they have been notionally accepted by purchasing the good and opening the box.
Boilerplate terms are not salient
The most important terms to purchasers of a good are generally the price and the quality, which are generally understood before the contract of adhesion is signed. Terms relating to events which have very small probabilities of occurring or which refer to particular statutes or legal rules do not seem important to the purchaser. This further lowers the chance of such terms being read and also means they are likely to be ignored even if they are read.
There may be social pressure to sign
Standard form contracts are signed at a point when the main details of the transaction have either been negotiated or explained. Social pressure to conclude the bargain at that point may come from a number of sources. The salesperson may imply that the purchaser is being unreasonable if they read or question the terms, saying that they are "just something the lawyers want us to do" or that they are wasting their time reading them. If the purchaser is at the front of a queue (for example at an airport car rental desk) there is additional pressure to sign quickly. Finally, if there has been negotiation over price or particular details, then concessions given by the salesperson may be seen as a gift which socially obliges the purchaser to respond by being co-operative and concluding the transaction.
Standard form contracts may exploit unequal power relations
If the good which is being sold using a contract of adhesion is one which is essential or very important for the purchaser to buy (such as a rental property or a needed medical item) then the purchaser might feel they have no choice but to accept the terms. This problem may be mitigated if there are many suppliers of the good who can potentially offer different terms.
Some contend that in a competitive market, consumers have the ability to shop around for the supplier who offers them the most favorable terms and are consequently able to avoid injustice. However, in the case of credit card contracts, for example, the consumer while having the ability to shop around may still have access to only form contracts with like terms and no opportunity for negotiation. Also, as noted, many people do not read or understand the terms so there might be very little incentive for a firm to offer favorable conditions as they would gain only a small amount of business from doing so. Even if this is the case, it is argued by some that only a small percentage of buyers need to actively read standard form contracts for it to be worthwhile for firms to offer better terms if that group is able to influence a larger number of people by affecting the firm's reputation.

Another factor which might mitigate the effects of competition on the content of contracts of adhesion is that, in practice, standard form contracts are usually drafted by lawyers instructed to construct them so as to minimize the firm's liability, not necessarily to implement managers' competitive decisions. Sometimes the contracts are written by an industry body and distributed to firms in that industry, increasing homogeneity of the contracts and reducing consumer's ability to shop around.

As a general rule, the common law treats standard form contracts as any other contract. Signature or some other objective manifestation of intent to be legally bound will bind the signor to the contract whether or not they read or understood the terms. The reality of standard form contracting, however, means that many common law jurisdictions have developed special rules with respect to them. In general, courts will interpret standard form contracts literally 'against the proffering person' but specific treatment varies between jurisdictions.

Continue reading "Adhesion Contracts Beware of the Take It or Leave It" »

The primary advantage of an LLC over a limited partnership is that all members will enjoy limited liability even if they actively participate in the LLC's business. Therefore, says Los Angeles Business Lawyer Steven C. Peck, "an LLC need not have the equivalent of a general partners who is liable for the limited partnership debts". Members will have more flexibility in structuring the LLC's management than limited partners would have in structuring a limited partnership, because a member may participate in management without facing unlimited liability.

A limited partnership is required to have at least one general partner and one limited partner. An LLC that elects to organize in another state and regiater as an foreign LLC in California may have a single member if the law of the other state so provides.

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Continue reading "Choice of Entity: Limited Liability Company or Limited Partnership?" »

A buy-sell agreement for a partnership is very different document from a buy-sell agreement for a corporation, even though their objectives may be the same, because of the distinctions between the corporate and partnership form of doing business. Moreover, the requirements of the Unifrom Partnership Act and the California Revised Limited Partnership Act are not as comprehensive as the statutues governing corporations.

Consequently, the charter documents of most partnerships are usually not as extensive and specific as the articles of incorporation and bylaws of even simple corporations and may leave open issues that must be addressed in the buy-sell agreement. Perhaps the most important distinction between partnerships and corporations is that a partnership, particularly a general partnership, is not generally recognized as a separate entity distinct from its partners.

For example, general partners (unlike shareholders) are not shielded from liabilities of the partnership and may remain subject to claims even after the partner's withdrawal.

Consequently, clients should be advised and prvosions should be included in any buy-sell agreement to protect a withdrawn partner from possible claims against the partnership, especially those in existence before the withdrawal, if the partnership agreement does not cover this issue.

Continue reading "Partnerhsip Buy-Sell Agreements a Preliminary Analysis" »