Basics of contracts Contracts as easy as ABC: A Users Guide


AGREEMENT

Often the word agreement is used loosely to mean a contract. However, an agreement will only be a legally binding contract if the four elements of contract exist (see Consideration).

BUYER

One of the parties in a contract for sale. The seller is the other party.

CONSIDERATION

To be legally enforceable by the courts, every contract has four legal elements required by law: an offer, acceptance, consideration and an intention to create legal relations. Of these, consideration is probably the most difficult to understand and to explain! It is also very important. Without consideration there may be an agreement between two parties, but there will not be a legally binding contract. The law will not allow either party to get something for nothing; both sides must give some ‘thing’ of value to the other. That ‘thing’ is the consideration. Some examples are: giving a promise to pay the asking price for a work; giving a promise to paint a picture and sell it to the commissioner for an agreed sum. Consideration is the crucial element which distinguishes a legally enforceable exchange of promises from mere mutual promises (such as friends agreeing to meet each other), from a simple gift, or an unenforceable agreement.

DEAL

Like an agreement, a deal is another word for a legally enforceable contract, so long as it has the four elements required by law.

EVIDENCE

Even if a contract has been made the parties may find it difficult to prove its existence in a court of law if the deal was made orally or simply by gestures. Written documents, tape-recordings and faxes are admissible in court as evidence of the making of a contract and of its Terms and Conditions (see below).

FRUSTRATION

Legal jargon describing something that happens to make it impossible for the contract to be performed. For example, a painting is stolen after an agreement for its sale; the performance of the contract is said to have been frustrated so that neither side can be forced to keep to their side of the bargain.

GESTURES

Even without speaking a word, parties can make a contract. Supermarket shopping provides an everyday example: buyers fill their baskets with food, take it to the checkout and offer to buy at the advertised price; the seller keys in the price, accepting the offer; the money – the consideration – is handed over. Nothing has been said, yet a legally enforceable contract for the sale of the goods has been made. (See also, Intention to create Legal Relations, below).

HIRE PURCHASE

Hire purchase agreements are contracts of sale, whereby the buyer agrees to pay the full purchase price by instalments and is allowed to use or ‘hire’ the goods until final payment is made, when ownership passes from seller to buyer.

INTENTION TO CREATE LEGAL RELATIONS

One of the four elements required by law for a contract to exist. If both parties intend to make a legally binding agreement, then they intend to create legal relations. It is customarily shown in this country by the parties shaking hands. In roost agreements, the law assumes that parties do intend to create legal relations, even if nothing is said.

JUDGE

If a contractual dispute ends up in court the judge will have to ‘construe’ the contract; ie. decide what the parties meant to agree at the time, and what they in fact agreed. The judge will look at the evidence and, where necessary, imply what must have been meant or agreed if the available evidence is not clear.

KIDS

Contracts with under 18 year olds are only binding if they are contracts for ‘necessaries’.

LEGALLY BINDING

All contracts are legally binding in theory, unless they are themselves in some way legally unacceptable (such as a deal to buy illegal drugs). In practice, if there is no evidence of the existence of a contract, it may be impossible to prove; which is why documentary evidence is preferable.

MORAL RIGHTS

An artist’s moral right to be identified as the author of his/her work must be asserted in writing and signed by the artist as author. This should be included in all contracts concerning artwork, and be indelibly marked on the work together with the declaration of copyright ownership: ‘© Henry Lydiate & Nathalia Berkowitz 1993; the moral rights of the joint authors are asserted’.

NOTICE

Terms and conditions of a contract will only be binding on the parties if they have notice of them before they finalise the deal. For example: an artist offers to make and sell a work to a commissioner for £500; the commissioner agrees and specifies the materials to be used; it later transpires that the materials the artist agreed to use are more expensive, so the artist asks for more money saying that the buyer should have realised that the price might rise if the specified materials actually cost more; but nothing was said to clarify this point when the contract was made. The commissioner had no notice of this matter and so is entitled to refuse to pay any more for the materials, and the artist must still execute the work in the materials specified and sell it for £500. If, however, the commissioner agreed to pay extra as requested, then the terms and conditions of the original contract would have been varied by mutual agreement.

ORAL

Almost all contracts may be made orally. But there may be problems proving them. A few contracts, especially ones for the transfer of copyright ownership, must be made in writing and signed by the artist/copyright owner.

PAYMENT

The method and manner of payment should always be included in the terms and conditions of all contracts. The parties should consider how and when payment is to be made.

QUALITY

All contracts for the sale of artwork must comply with the provisions of the Sale of Goods Act 1979. Among other things, the act requires that goods are of ‘merchantable quality’ and ‘fit for the purpose’ for which they are sold, i.e. they must not deteriorate or fall apart and be capable of being used and enjoyed by the buyer, if they are treated properly.

REVOCATION

An offer may be revoked (taken back) at any time before it has been accepted, thereby preventing a contract from coming into existence.

SMALL CLAIMS

Taking a contractual dispute to court need not be difficult. If the claim is for £5,000 or less, the matter can be resolved by arbitration in the ‘Small Claims Court’, a service provided by a County Court. The parties can, and often do, represent themselves without lawyers and the procedure is relatively informal.

TERMS AND CONDITIONS

These are the essential details of a contract agreed by the parties at the time – or subsequently construed by the court in resolving a dispute.

UCTA

Contracts must also comply with the Unfair Contracts Terms Act 1977, which aims to protect parties from a contractual ‘small print’ and will not allow the terms to contain ‘exclusion clauses’ which are unreasonable; e.g. where the seller states that no liability will be accepted for any damage whatsoever.

VARIATION

Parties may vary the terms and conditions of their contracts, but only if both agree to do so. It is possible, and useful, to specify in a written contract that any subsequent variations must also be in writing.

WRITTEN

Contracts do not need to be in writing to be legally binding. But it is essential that artists’ commercial dealings are always written, so as to provide evidence in subsequent disputes and to act as a useful aide-memoire in any event.

EXtremely unhappy may be the way the parties to a contractual dispute feel!

YEARS

How long contractual disputes can take to resolve.

ZERO

What parties to a contractual dispute may end up with if they have not carefully considered making a deal and made sure that there is evidence of its terms and conditions.

© Henry Lydiate 1993

 

Courtesy of www.artquest.org.uk

© 2011 – 2013, Visual Artists Ireland or Copy Originator. All rights reserved. No copyright is extended unless under licence