Watch: Contract Basics

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Transcript

Monica DeBosscher [0:00] We can start out really simply by just talking about what a contract is and what you need in order for a contract to be enforceable and why this is really important for you. In your breeding programs, contracts are surely an important element that will arise in many different forms. I think probably the most common is a pet purchase agreement. As Gayle mentioned, there are probably a lot of contracts that you’re dealing with. In its most basic form, a contract is really just a re-enforceable agreement between two or more parties to perform some act now or in the future. 

[0:38] When drafting a contract, it’s important to clearly communicate both parties’ rights and obligations with regards to the dog. It’s important to know that if you ever need to have your contract enforced in a court of law, a court can only enforce what the contract actually says. They won’t care about what you meant to say or what you thought you were agreeing to. You have to be certain that you’re being very clear in the terms that you include and make sure that none of the terms are conflicting in any way, that none of them are vague or subject to interpretation. Just be as clear as possible. This not only protects you, but it also protects your buyers, so they know exactly what they’re agreeing to. You’ll see in this slide that there are a few things that a contract needs to have in order for it to be enforceable. First is agreement. This just means that one party has offered to enter into an agreement, and the other party has to accept the terms of the offer. There’s no formal contract until both parties have agreed. If it’s just sort of you emailing your form contract to a potential buyer and the buyer hasn’t signed or sent it back to you, then there’s no contract and there’s no agreement. Next is consideration. This just means that something of value must be exchanged or promised to convince each of you (as the breeder and your buyer) to agree to the deal. Both parties need to be getting something in order for the contract to be valid. In your cases, when it comes to pet purchase agreements, you’re getting a lifetime home for your dog and a certain amount of money, and your buyer will be receiving (presumably) lifetime support from you and a dog. Most of the time, with a contract, this is just going to happen naturally so you don’t have to think too much about it, but it’s just a good thing to keep in mind. Next is capacity. This means that both parties have to be competent to enter into the agreement. If Cat and I went out for drinks, and we each had like 10 glasses of wine, and then we decided we were going to enter into a contract and Cat was going to sell her house to me, that’s not going to be a valid contract. If the other party is a minor, if the other party is legally intoxicated, you don’t have a valid contract. Next is legality. This means that the contract’s purpose must be to accomplish some goal that is legal and not against public policy. For instance, if I contract with Judi, and Judi is going to murder someone for me, and then Judi doesn’t do the murder, I can’t take her to court for breach of contract because murder is illegal. The purpose of the contract was illegal. There is no valid contract. Hopefully this is not something that you should be having a problem with… but just to keep it in mind! Next is assent. This means that both parties must genuinely agree. If I enter into a contract with Cat, and the only reason I agree to it is because Cat threatened to beat me up if I didn’t agree, that contract would not be valid. Hopefully this one is not coming up for you guys, but as long as you and your buyers are entering into the contract of your own volition, you’re probably fine. Next is form and execution. This just means that the agreement has to be in whatever form the law requires. For your purposes, this really just means that the contract should be in writing and signed by you and your puppy buyers. Technically-speaking, a contract doesn’t have to be signed in writing in order to be enforceable, but it’s always a best practice for it to be in writing because then it’s your best proof that an agreement has been made. The terms are clearly outlined. Next is the fact that your contract should list conditions and requirements. Most breeders will impose some conditions on the new owner. You’ll want to list every desired condition that you can think of in the written contract because if it’s included, it’s probably enforceable. Even if it sounds like something that you wouldn’t find in a normal legal contract (like maybe requiring your buyers to send you photos regularly of the dog), still include it! If you don’t include it, there’s no chance it’s enforceable. Just include as much as you think you need. Some contracts require the buyers to provide things like affection. Some clauses like that—they may not be legally enforceable. It would be tough to go to court and say, “Not enough affection was being provided to the dog,” but including provisions like that is still important because they might influence the buyer’s behavior. That’s something to consider. Even if something that ends up in your contract doesn’t end up being enforceable, just having it in there might sort of make your puppy buyers act a certain way. Next we have guarantees and warranties. Guarantees and warranties are basically promises that you’re making to your buyer. Typically, your state will have some guarantees and warranties that will apply to you, just as a matter of law. You’ll have to abide by them, whether or not you include them in your contract. One example of those are pet Lemon Laws, which we’ll touch on later. But there are a few warranties that you should be aware of, generally. First is the warranty of merchantability. You don’t have to remember the names, but maybe just the concepts. Unless you specifically say that this warranty will not apply to you and your dog, then a breeder’s contract will likely be held to include this warranty. This really just means that the dog is reasonably fit for the general purpose for which the dog is sold. It’s typically helpful to consider including some kind of a disclaimer in your contract if it applies to you that says something like the puppy is only being sold as a companion, that the puppy is not fit for breeding, that the puppy is not guaranteed to grow to a particular size or weight. It’s just important to remember that this warranty will always apply to you, but in your contract and in the language that you use, you can limit the ways in which it’s applied. It sort of fits in with the warranty of fitness for a particular purpose, which is another warranty that you should be aware of. Some buyers sort of have in mind a particular purpose for the new puppy, so maybe that’s that the dog will be a show dog, that it’ll be a breeding dog, that he’ll become a service animal. Generally speaking, if you as the breeder know that the buyer has a particularly intended purpose for the dog in mind (like you know that the buyer is buying the dog in order to breed the dog), then you are assumed to specifically warrant fitness for that purpose. But we know that a dog is not an object, right? So you can’t predict exactly what’s going to happen with the puppy or what the puppy will be capable of in the future. It makes sense to consider some kind of a disclaimer that says that a particular purpose is contemplated. Maybe breeding is contemplated. But the puppy is sold merely as a prospect for that purpose with no guarantee. Again, you’re really able to limit the way a warranty is applied to you based on the language that you use. Lastly, we have remedies. The contract can dictate the consequences if one party fails to meet the conditions of the contract. For example, your contract might say something like the buyer has to return the dog if there’s a serious breach of contract. A contract can also limit the buyer’s remedies or what the buyer is entitled to. I think the most important thing when it comes to remedies that you should remember is you should always include some remedies for your buyers. If you have no remedies for your buyers, it’s more likely that a buyer could challenge the legality of a contract, and that you won’t be protected. Because courts really don’t like to see one-sided contracts. They like to see that both parties are getting something out of the deal and are both protected.