Regulatory and Legal issues

Contracts

- is a meeting of minds between two persons whereby one binds himself, with respect to the
other, to give something or to render some service. (1254a)”40 Discussion of the Law 40 --
Civil Code of the Philippines.

Two categories that govern the legality of contract

Statutory Law

Statutory Law is the term used to define written laws, usually enacted by a legislative body. Statutory
laws vary from regulatory or administrative laws that are passed by executive agencies, and common
law, or the law created by prior court decisions.

Unlike common law, which is subject to interpretation in its application by the court, statutory laws
are generally strictly construed by courts. Strict construction means that courts are generally not able
to read between the liens of a statute in order to liberalize its application. Rather, they will be bound
by its express terms.

As legislative enactments, statutory laws follow the usual process of legislation. A bill is proposed in
the legislature and voted upon. If approved, it passes to the executive branch (either a governor at
the state level or the president at the federal level). If the executive signs the bill it passes into law as
a statute. If the executive fails or refuses to sign the bill, it can be vetoed and sent back to the
legislature. In most instances, if the legislature again passes the bill by a set margin it becomes a
statute.

Statutes are also recorded, or codified, in writing and published. Statutory law usually becomes
effective on a set date written into the bill. Statutes can be overturned by a later legislative enactment
or if found unconstitutional by a court of competent jurisdiction.

Common Law

Common law is a body of unwritten laws based on legal precedents established by the courts.
Common law influences the decision-making process in unusual cases where the outcome cannot be
determined based on existing statutes or written rules of law. The U.S. common-law system evolved
from a British tradition that spread to North America during the 17th- and 18th-century colonial
period.

Precedent means that the decisions judges have made in earlier cases guide how future cases are
decided. In common law systems, this principle is called stare decisis, and it has a binding effect on
judges and courts: Stare decisis holds that cases should be decided according to consistent principled
rules so that similar facts will yield similar results. If the court finds that the current dispute is
fundamentally distinct from previous cases, judges have the authority and duty to make law by
creating precedent. Thereafter, the new decision becomes precedent and will bind future courts.

Legal contract

A contract is a legally enforceable agreement between two or more parties. It may be oral or written.
A contract is essentially a set of promises. Typically, each party promises to do something for the other
in exchange for a benefit.

Required Characteristics

To constitute a legal contract, an agreement must have all of the following 5 characteristics:

Legal purpose. A contract must have a legal purpose to be enforceable. For example, Steve hires Paul
to kill Susan. Steve drafts an agreement outlining Paul's responsibilities, namely to acquire a gun and
shoot Susan in the head. The agreement also specifies the amount Steve will pay Paul once Susan is
dead. A contract of murder for hire is illegal. If Paul fails to fulfill his obligations under the agreement,
Steve will have no recourse against Paul. The agreement Steve has drafted is unenforceable.

Mutual Agreement. All parties to the contract must have reached a "meeting of the minds." That is,
one party must have extended an offer to which the other parties have agreed. For example, Jim signs
a contract with Tom's Tree Trimming. The contract outlines the scope of the work Tom will perform
on Jim's property. Jim and Tom have a mutual agreement regarding the work that will be done.

Consideration. Each party to the contract must agree to give up something of value in exchange for a
benefit. For example, you hire an independent contractor to repave your driveway. You and the paving
contractor sign an agreement in which you promise to pay a sum of money in exchange for the paving
work. Both you and the contractor have agreed to give up something of value. You have agreed to pay
money, and the contractor has agreed to perform the paving work.

Competent Parties. The parties to a contract must be competent. That is, they must be of sound mind,
of legal age, and unencumbered by drugs or alcohol. If you enter into a contract with a minor or an
insane person, the contract will not be enforced.

Genuine Assent. All parties must engage in the agreement freely. A contract may not be enforced if
mistakes have been made by one or more parties. Likewise, a contract may be voided if one party has
committed fraud or exerted undue influence over another. For example, you sign a contract in which
you agree to sell your house to your next-door neighbor for $1. When you signed the contract, your
neighbor was pointing a gun at your head. Clearly, you made the agreement under duress, so the
contract is not valid.

Types of Legal Contract

Employment Contracts
An employment contract is a legal agreement between a business and an employee that details the
terms of employment, such as pay and benefits. Some small companies operate without formal,
written employment contracts, but a written contact can provide more security and certainty to
employers and employees than an oral agreement. Businesses that hire independent contractors may
enter into contracts called work-for-hire agreements that specify the type of work to be done by
contractors and contractor pay.

Stipulations included in an employment contract

Confidentiality agreements are legally binding contracts in which one party promises to keep trade
secrets and not to disclose secrets without authorization from a superior. These agreements are
usually binding until the private information is commonplace or the receiving party is released from
the contract, whichever occurs first.

A confidentiality agreement is also known as a non-disclosure agreement or an "NDA." Confidentiality

agreements protect private company information like financial details, business strategies, customer
lists, or products and services underway or in development, and prevent employees from
communicating or profiting from sensitive information.

Trade Secret Agreements

Company’s Trade Secrets

In the performance of Employee’s job duties with Company, Employee will be exposed to Company’s
Confidential Information. “Confidential Information” means information or material that is
commercially valuable to Company and not generally known or readily ascertainable in the industry.
This includes, but is not limited to:

(a) technical information concerning Company’s products and services, including product
know-how, formulas, designs, devices, diagrams, software code, test results,
processes, inventions, research projects and product development, technical
memoranda and correspondence;

(b) information concerning Company’s business, including cost information, profits, sales
information, accounting and unpublished financial information, business plans, markets and
marketing methods, customer lists and customer information, purchasing techniques, supplier
lists and supplier information and advertising strategies;

(c) information concerning Company’s employees, including salaries, strengths, weaknesses, and
skills;

(d) information submitted by Company’s customers, suppliers, employees, consultants or co-

venture partners with Company for study, evaluation or use; and

(e) any other information not generally known to the public which, if misused or disclosed, could
reasonably be expected to adversely affect Company’s business.

Nondisclosure of Trade Secrets

The Employee shall keep Company’s Confidential Information, whether or not prepared or developed
by Employee, in the strictest confidence. The Employee will not disclose such information to anyone
outside Company without Company’s prior written consent. Nor will Employee make use of any
Confidential Information for Employee’s own purposes or the benefit of anyone other than Company.

However, Employee shall have no obligation to treat as confidential any information which;

(a) was in Employee’s possession or known to Employee, without an obligation to keep it confidential,
before such information was disclosed to Employee by Company;

(b) is or becomes public knowledge through a source other than Employee and through no fault of
Employee, or

(c) is or becomes lawfully available to Employee from a source other than Company.

Discovery Agreement

A discovery agreement is a summary of your understanding of the customer situation, their current
situation, and their desired situation – where they want to go, what their priorities are, what the
impact of that is, so that you can define the gap in between the two, before you advocate or
recommend a solution.

NONCOMPETITION AGREEMENT

In the noncompetition clause the employee agrees that for a certain amount of time after he or she
stops working for the employer, the employee will not become employed by a rival company or any
company engaged in a similar type of business, and the employee will not set up a company that will
compete with the employer's business or solicit the employer's customers. Usually the
noncompetition clause is limited to a particular geographic area.

Trading Partner Contract

An agreement between two parties as a form of contract. The agreement can include various terms
of trade, such as duties, responsibilities, liabilities, including delivery and receipt of goods and services.
This is meant to provide additional security for each party to prevent disputes, since the terms of trade
have been outlined and agreed upon