Video Transcript:

Introduction To Contracts

"Thank you very much for joining us. This is Bob Hahn. I'm an attorney in Silicon Valley. I've been practicing for 25 years primarily in transactional practices where I commonly work with CFOs and other members of a finance team to assist a company through its legal issues.

One of the areas that I speak to clients about repeatedly is what contracts are, what they are used for, the risks and the rewards that are contained in them. One of the most important things that I find is that the more my clients know about contracts the better job I can provide and the lower bill, which is of interest always to everyone.

Let's get started here. Contracts are basically a collection of words. The big issue, as I'm sure you've found through your practice, particularly in arguing over contracts, is what words might mean. Something to keep in mind as we go through this program.

What is a contract? They're everywhere. Contracts are oral. Dad, can I borrow the car? Sure, as long as you wash it first. Perfect example of a contract. We grow up with these things. It's a way that we transact as humans.

Contracts, again, can be oral. They can be printed on paper. They are formed when we go to the grocery store and buy a roll of wax paper in exchange for some kind of money. They are online. It's a very important aspect of contracts these days that we know that when we download an app, or we enter into a SaaS website, or we find a piece of software to incorporate into our software product we are often forming a contract.

The last, and one that's very tricky here, is text messages and other electronic communications. There are cases that talk about how contracts get modified through these types of interchanges, so it's very, very important for you to know when you are entering into a contract. How do you know about that? Let's get into that a little bit later.

First, let's talk a bit about where we find the sources of contracts in law. There are three basic sources of areas where we find contracts. First and foremost is the Uniform Commercial Code. This is a body of law that talks about such things as transactions between merchants, leases, licenses, and the sort. It allows companies to have a basis for determining what their contract means notwithstanding they may not have written things down.

The challenge with the UCC is much of it has come up when we were transacting in corn and cotton. Notwithstanding that, it applies to such things as computer software and other intangible property.

One of the most important areas of the UCC that we'll be talking about a little bit later is the use of implied warranties. Under the UCC there are certain warranties that are implied in every transaction, and it will be critical for you to know what those implied warranties are, how they can be disclaimed, and what their impact is to you.

A second area of sources of law for contracts is in the civil codes of various states and the case law that comes down through those various state courts. One thing to keep in mind here is that we are a federal system. We are classically a united states, so as you start to transact with companies and parties in other states you need to keep in mind that those contracts may be governed by laws of other states.

In a situation where a provision is critical to the deal and it is governed by a state that your lawyer is not licensed to practice in, your lawyer will typically tell you that it's important for you to contact a lawyer that's licensed in that state so that you know what your rights and obligations are.

The third source of law, although arguably it's a subset of civil codes or other statutory law, are substantive laws that are special to the various area that you're dealing with. For example, in securities laws when you're buying and selling stock there is a whole set of substantive laws that govern what you can do. In real estate when you're entering into a lease or buying a piece of real property there are very specific laws that concern how you can take security interest, otherwise known as mortgages, how you can transfer property, and so forth. Each of these have to be reviewed relative to the subject matter of your area that you're dealing with in your contract."

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