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Objectives 1. To discuss contracts.

2. To discover the creation process of a contract.

3. To explain employment law.

4. To examine how employment law affects both employees and employers.

5. To analyze how employment laws affect business.

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Main Menu

• Contract Law

• Employment Law

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ContractLaw

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A Contract • Is a legally binding document• Is between two or more parties – people,

organizations or corporations• Creates an obligation• Is usually regulated and enforced by the

state in which it was written

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Contract Law • Affects all fields of business• Includes the following common business

transactions: – sale of land– property leases– product sales– product orders

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Common Business Contracts

• Include:– franchise agreements– real estate leases– equipment contracts– warranty contracts– stock purchase agreements– manufacturing agreements

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Contract Law • Is becoming increasingly more

complicated as businesses now write more contracts than ever

• Is effecting business due to increased litigation

• Affects businesses due to increased legal fees

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Written Contracts • Provide proof for future legal situations in case

of legal disagreements• Help parties realize what is expected of them in

a contract • Force the parties to agree on details, such as

the exact number of goods or the exact price for a contract– this can prevent verbal arguments over small

disagreements such as a shipping date which may take a long time to fix down the road

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Oral Contracts • Are legal contracts made through speech –

there may be no written evidence• Are just as enforceable and as legally

binding as written contracts• May be harder to prove in court

– therefore, most business contracts are written

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Contracts• Which must be in writing include:

– real estate– goods valued at more than $500, such as

a contract for the creation of handmade purses which total $800

– actions taking a year or longer to perform, such as a construction project which will take three years to complete

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Contracts• Which may be oral include:

– most other contracts, such as an agreement for your neighbor to mow your lawn in exchange for a monetary payment could be made orally and still be legally enforceable

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Laws Which Govern Contracts

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Uniform Commercial Code (UCC)- governs the sale of goods

Common law - judge-made law passed down over the years

Setting Up a Contract • All parties involved in a contract must

be competent – able to execute the contract

• All parties must agree to the terms of the contract; known as mutual agreement

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Parts of a Contract

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Offerfor a good or service

must be in definite terms

another party agrees to the terms

bargaining in which parties give up and/or receive

something

Acceptance

Consideration

The Offer • Stays open for a time specified on a contract

or for a “reasonable” time– reasonable refers to a court interpretation of what

would be reasonable considering the circumstances

• Can be taken away, or revoked, by the party which offered the contract until the other party agrees

• Is legally binding once the other party agrees

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Counteroffers • Occur when the original offer is not

accepted and a new offer is returned in place of the original offer

• Void, or nullify, the original offer• May be accepted, rejected or modified

by the party which made the original offer

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Counteroffer

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Party A Party BOriginal offer

Party A Party BCounteroffer

The Acceptance • Occurs when the party to which the offer

was made agrees to the terms of the contract

• May not be made immediately• Must somehow be communicated to the

party offering the contract– silence does not usually count for a legal

acceptance

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Example of Acceptance • An art studio contacts an artist by mail

to create a painting. Once the artist signs the contract and places the contract in the mail, the contract has been accepted and is now legally binding.

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Consideration • Is the legal term for the bargain occurring

when one party gives something up and another party receives something in return

• Requires both parties to either give or receive something of value

• Does not include one-sided promises such as gifts

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Example of Consideration • If your friend promises to give you a new car

for your birthday, but you give him or her nothing in return there is no consideration. Therefore, your “contract” would not stand up in a court of law.

• However, if you traded him a trip to your beach house in Hawaii for the car, both parties would be giving something of value, or consideration, and therefore a legal contract would exist.

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Breaching a Contract • Occurs when one party intentionally or

unintentionally does not fulfill their contractual obligations

• Awards the other party some kind of reward under law– this may include monetary

damages or cancellation of the entire contract

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Example of Breaching a Contract

• Fictitious star basketball player Kevin Jumes agrees to wear a pair of shoes from Syke Shoes, Inc. At game time he instead puts on a pair of Air Nine Stripes, a Syke competitor. Syke could sue for a breach of contract and possibly get the contract enforced.

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Breaching a Contract • Can destroy a business’s reputation• May sever business relationships with the

other contractual party• Can cause one party to be sued by the other

party– if sued, the court may require the breaching

party to fulfill the original contract anyway; this is called specific performance

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Contract Essentials • Contracts contain key areas, including:

– title– description of project– description of services– list of delivery dates– who is responsible for what– payment amounts– signatures

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ContractLaw

Assessment

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Assessment1. Which of the following does NOT require a contract in

writing?

A. Real estate

B. Goods over $500

C. Goods under $200

D. Actions taking longer than one year

2. Which of the following governs the sale of goods?

A. Universal Commercial Code

B. Unified Commercial Code

C. Trade of Goods Commission

D. Sales Commission

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Assessment3. Which of the following is NOT part of a contract?

A. Offer

B. Acceptance

C. Consideration

D. Introduction

4. Which of the following occurs when the original offer is not accepted and a new offer is returned in place of the original offer?

A. Replacement offer

B. Acceptance

C. Counter offer

D. Consideration29

Assessment5. Which of the following occurs when one party

intentionally or unintentionally does not fulfill their contractual obligations?

A. Counter offer

B. Acceptance

C. Breach of contract

D. Consideration

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Employment Law

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Employment Law • Is defined as the large area of law

covering all aspects of the employer and employee relationship

• Is important to know from both sides: as an employee and as a company

• Consists of thousands of laws

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Employment Law • Includes countless laws enacted to

protect workers• Includes laws which affect every

American, such as taxes collected to finance unemployment compensation

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Employment Law Areas

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collective

bargainingemployment

discriminationunemployment compensation

pensionsworker’s

compensation

Collective Bargaining • Is when employers and employees

negotiate their salary and work requirements

• Involves the employees being represented by a union, a group formed by employees to negotiate with the employer

• Is governed by the National Labor Relations Act

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Collective Bargaining • Can sometimes lead to strikes and

layoffs to force demands• With union representation is less

popular now than in the past

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Collective Bargaining • Is common in the sports industry• Many of the top professional leagues

have players unions– for example, a strike lead to a 191 day

lockout of the 1998 NBA season– the NBA owners, teams and league lost

nearly one billion dollars

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The National Labor Relations Act (NLRA)

• Is a federal law passed in 1935• Allows employees to join unions and

collectively bargain• Prevents employers from seeing which

employees are in a union• Created the National Labor Relations Board

to oversee and enforce the NLRA

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Employment Discrimination Law

• Aims to prevent employment discrimination based on race, sex, age, religion or physical disability– the Equal Pay Act states employers cannot

discriminate wages based on gender– the Americans with Disabilities Act of 1990

makes it unlawful to discriminate employees based on a disability

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Equal Employment Opportunity Commission (EEOC)

• Is a federal organization overseeing most employment discrimination laws including the Equal Pay Act and the Americans with Disabilities Act of 1990

• Requires employers to display posters with employment discrimination law topics

• Handles employment discrimination complaints

• http://www.eeoc.gov

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EEOC Poster • http://www.dol.gov/esa/regs/compliance/posters/pdf/disabc.pdf

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Unemployment Compensation

• Provides funds for workers who are unemployed due to layoffs

• Allows time for workers to find another job• Prevents workers from taking a job for which

they would be overqualified • Was established by the federal Social

Security Act in 1935• Is funded by taxpayers

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Pensions • Are payments made to employees after

retirement, similar to a retirement plan• Are regulated by the Employee Retirement

Income Security Act (ERISA)• ERISA requires employees and the Labor

Department receive a detailed list of what each employee will receive when it is time to collect their pension– this prevents fraud and allows the employees to

see they are receiving adequate funding

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Workplace Safety • Is an important area of employment law for

employees’ well being• Is regulated by laws regarding employee

injury and illness occurring on the job• Is mainly controlled by the Occupational

Safety and Health Administration (OSHA)– regulates and investigates workplace incidents

involving injury and illness for most U.S. workers

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OSHA Example • In Brooklyn, N.Y., an OSHA compliance

safety and health officer requested construction employees be removed from a 22-foot deep excavation due to the hazardous 10-ton concrete protrusion hanging above them. Fifteen minutes later, the overhang collapsed and fell, landing in the exact spot where the employees had been working.

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Workers Compensation Laws

• Are designed to provide payment and assistance to employees who are hurt or disabled on the job

• Provide fixed monetary awards to such individuals

• Protect employers by limiting the maximum amount an employee can recover if hurt or disabled

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• Provide monetary payments to families if a family member is killed on the job

• Fund payments through the Federal Employment Compensation Act

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Workers Compensation Laws

Contract Law vs. Employment Law

• Contract law and employment law are interrelated

• Many employment laws, such as pension plans and labor unions use contract law to enact and enforce their employment laws

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Contract Law

EmploymentLaw

Contract Law vs. Employment Law

• For example, labor unions such as the United Auto Workers operate under employment law

• They work to gain favorable labor contracts for their workers– the labor contracts would be considered an

area of contract law

• In this way, employment law can be thought of as a part of contract law

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Contract Law vs. Employment Law

• However, contract law and employment law are different in the fact that employment law changes much more frequently than contract law– most of contract law was enacted after years

of law and thus does not change often – employment law affects more current events

such as pension plans and worker’s compensation

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Contract Law

EmploymentLaw

Impact of Contract & Employment Law on Business

• U.S. businesses spent about $11 trillion last year complying with these laws

• Most of those transactions fall under contract law

• Dues for labor unions are covered under employment law– these laws affect the lives of millions of

workers– for example, the union of United Auto

Workers at Honda in Toronto requires dues of two hours pay per month

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Employment & Labor Law

• Is concerned with worker’s rights• Includes the right to organize and/or join

a union• Includes the right to strike• Prevents an employee from being fired

or demoted because of union activity (such as joining a union or discussing union activities)

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“At Will” Employment• Is the most common type of

employment in the United States• States the employee can leave the job

at any time, without reason• Also means the employer can

terminate the employee at any time, without reason

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Unions• Are organized to protect the rights of

employees• Negotiate contracts containing clauses

protecting against “at will” termination• Require membership to be covered by

contract negotiations

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Unions in Action • In 2003 the employees of major grocers in St.

Louis went on strike– the ability to strike is granted by the National

Labor Relations Act– 10,000 grocery workers went on strike

• After six months of negotiation the grocers and union of the grocer’s employees came to an agreement

• Grocers agreed to new healthcare rules and a raise for employees

• Grocers lost millions of dollars in sales due to the strike

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The Future of Unions • According to the Bureau of Labor Statistics

12 percent of U.S. employees were unionized in 2006– in 1983, 20 percent of U.S. employees were

unionized– the percentage of unionized workers continues to

fall

• Is likely suffering due to the downturn in U.S. manufacturing, an industry which was historically highly unionized

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Employment Law

Assessment

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Assessment1. Which of the following are laws which protect workers?

A. Employment laws

B. Health insurance laws

C. Financial laws

D. Wage laws

2. Which of the following is NOT an area of employment law?

A. Collective bargaining

B. Pensions

C. Discrimination

D. Contract

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Assessment3. Which of the following is a group formed by employees

to negotiate with employers?

A. Collective bargainers

B. Union

C. Task force

D. Agents

4. The Equal Pay Act focuses on the discrimination of wages based on which of the following?

A. Gender

B. Age

C. Race

D. Disability59

Assessment5. The acronym EEOC stands for which of the following?

A. Equal Employment Opportunity Council

B. Employment Equality Opportunity Council

C. Equal Employment Opportunity Commission

D. Employment Equality Opportunity Commission

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Final Assessment

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Assessment1. Contracts are usually regulated and enforced by

which of the following?A. The city in which they are written

B. The county in which they are written

C. The state in which they are written

D. The country in which they are written

2. A product sale is considered a contract.A. True

B. False

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Assessment3. Common law governs the sale of goods.

A. True

B. False

4. Which of the following is the legal term for the bargain occurring when one party gives something up and another party receives something in return?

A. Offer

B. Counteroffer

C. Consideration

D. Negotiation

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Assessment5. John and Jane signed a contract for the sale of

John’s car. Jane breached the contract, so John sued her. The court is requiring Jane to fulfill the original contract. This is known as which of the following?

A. Revoking the contractB. Common lawC. ConsiderationD. Specific performance

6. Employment law covers all aspects of the employer and the employee relationship.

A. TrueB. False

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Assessment7. What is a union?

A. Federal agency overseeing most employment discrimination law

B. Federal agency regulating and investigating workplace incidents

C. A group formed by employees to negotiate with the employer

D. A group formed by employers to negotiate with employees

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Assessment8. What is the EEOC?

A. Federal agency overseeing most employment discrimination law

B. Federal agency regulating and investigating workplace incidents

C. A group formed by employees to negotiate with the employer

D. A group formed by employers to negotiate with employees

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Assessment9. What are pensions?

A. Judge-made laws passed down over the yearsB. Groups formed by employees to negotiate with

the employerC. People, organizations or corporationsD. Payments made to employees after they have

retired

10.What is the OSHA?A. Federal agency overseeing most employment

discrimination lawB. Federal agency regulating and investigating

workplace incidentsC. A group formed by employees to negotiate with

the employerD. A group formed by employers to negotiate with

employees 67

Resources • "Breach of Contract" and Lawsuits. (2008). Retrieved

September 30, 2008, from FindLaw: http://smallbusiness.findlaw.com/business-forms-contracts/business-forms-contracts-overview/business-forms-contracts-overview-breaching.html

• Acceptance of COntract. (2008). Retrieved September 30, 2008, from BarristerBooks.Com: http://www.west.net/~smith/acceptance.htm

• Business.Gov. (2007). Retrieved September 30, 2008, from Business.Gov: http://www.business.gov

• Contracts 101: What Makes a Valid Contract. (2008). Retrieved September 30, 2008, from FindLaw: http://smallbusiness.findlaw.com/business-forms-contracts/business-forms-contracts-overview-simple.html

• Contracts Basics. (2008). Retrieved September 30, 2008, from FindLaw: http://smallbusiness.findlaw.com/business-forms-contracts/business-forms-contracts-overview-basics.html 68

Resources• Collective bargaining. (n.d.). Retrieved September 30, 2008,

from Cornell University Law School: http://www.law.cornell.edu/wex/index.php/Collective_bargaining

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Resources• Employment discrimination. (n.d.). Retrieved September 30, 2008,

from Cornell University Law School: http://www.law.cornell.edu/wex/index.php/Employment_discrimination

• OSHA Saves Lives Images. (2008). Retrieved September 30, 2008, from U.S. Department of Labor: http://www.osha.gov/as/opa/oshasaveslives.html

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• Unemployment compensation. (n.d.). Retrieved September 30, 2008, from Cornell University Law School: http://www.law.cornell.edu/wex/index.php/Unemployment_compensation

• Workplace safety. (n.d.). Retrieved September 30, 2008, from Cornell University Law School: http://www.law.cornell.edu/wex/index.php/Workplace_safety

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Resources• Andreeva, C. D. (2007). Hollywood scribes, studios back in the

ring. Reuters .• Business and Contract Law. (2008). Retrieved September 30,

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Associated Content .• Workers compensation. (n.d.). Retrieved September 30, 2008,

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Resources• Basic US Labor Law (in a Nutshell). (n.d.). Retrieved

September 30, 2008, from Industrial Workers of the World: http://www.iww.org/organize/laborlaw/rights1.shtml

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