_______________________________________________________________ _______________________________________________________________ Report Information from ProQuest January 15 2015 07:28 _______________________________________________________________ 15 January 2015 ProQuest Table of contents 1. Contracts: Deal or No Deal?......................................................................................................................... 1 15 January 2015 ii ProQuest Document 1 of 1 Contracts: Deal or No Deal? Author: Shefrin, Deborah ProQuest document link Abstract: Shefrin discusses the basic elements that make contracts valid and enforceable. Such elements include mutual assent, an offer, acceptance of the offer, consideration, and the capacity of both parties to understand the terms, consequences, and legal purpose of the agreement. Links: Linking Service Full text: Headnote What basic elements make contracts valid and enforceable? This is the first of a series of Fiscal Therapy columns on contracts that will be published periodically in this magazine. Look for future columns on employment contracts, buying and leasing space and equipment, insurance and indemnity agreements, and contracting for services. In the course of their lives and careers, physical therapy professionals enter into a variety of contracts, such as lease agreements, home or practice purchase contracts, employment contracts, insurance contracts, loan agreements, and extended service or maintenance contracts. In many instances, no attorneys are involved and no written agreements are prepared. Sometimes the parties may not even recognize they have entered into a contractual relationship. Generally, this informal "hand-shake system" works quite well. Sometimes, though, misunderstandings and disputes arise between the parties. Participants may become angry, frustrated, and/or disappointed because they do not understand the nature of their relationship and the basic elements that create or negate the existence of a valid and enforceable contract. So, what elements are necessary to form a valid contract? What Is a Contract? A contract is a legally enforceable promise or agreement. In most circumstances it involves a pair or group of mutual promises, or an agreement by one party to do something in exchange for a particular action by the other party. Valid and enforceable contracts generally include a set of basic elements that include mutual assent, an offer, acceptance of the offer, consideration, and the capacity of both parties to understand the terms, consequences, and legal purpose of the agreement. Mutual assent. The essential requirement of a contract is objective evidence that the parties engaged demonstrate assent to the promises or agreement contained within the contract. What matters is "objective intent" (eg, what a reasonable, neutral, and objective observer would understand the parties' intent to be). This means you cannot escape an otherwise valid contract by, for example, claiming it was just a joke-even if a joke had been your true (subjective) intention-if a reasonable and objective observer would feel that the other party did not know, or could not have known, that you were not serious when you made your offer. Signing a contract is one way to show evidence of mutual assent. Alternatively, performance of the activities specified within a contract may indicate a party's assent to the terms of the offer. Offer and acceptance. In general, an offer is a promise to do or to refrain from doing something in exchange for a specified performance (eg, provision of a good or service), or the promise of performance. For an offer to be the basis of a contract, it must be made 1) in a way that expresses willingness to enter into a bargain, and 2) with the intention that it shall become binding on the other party as soon as the offer is accepted. An invitation to negotiate an offer is not sufficient basis for a contract. Acceptance is final and unqualified assent to the term or terms of an offer. To make the contract binding, acceptance must exactly match the offer. That is, the party accepting the offer must accept all the terms of the 15 January 2015 Page 1 of 5 ProQuest offer and nothing more. If a reply to an offer introduces a new term or changes one of the terms of the original offer, that reply cannot amount to an acceptance. Rather, the reply is treated as a "counteroffer" which the party making the original offer is free to accept or reject. A counteroffer also amounts to a rejection of the original offer, which cannot subsequently be accepted. The process of offer and acceptance results in a mutuality of obligations or bargained-for exchanges, which is at the heart of a valid contract. It is important that acceptance be communicated by the agreeing party within the time frame set by the party making the offer. If no time limit was stated, acceptance must be made within a reasonable time from the date the offer was made. Depending on the nature of the offer, acceptance may be made by signing a written document or by performing an act that communicates acceptance of the terms. For example, a PT who is a practice owner asks a dealer of durable medical equipment (DME) to provide the clinic with a treadmill for a certain price within a certain timeframe, and the dealer does so. In this case, delivery of the treadmill constitutes assent to the terms of the contract. Some other points to keep in mind when considering an offer include: * Revocation. This takes place when an offer is withdrawn prior to acceptance. Once an offer is revoked, assuming this occurs within acceptable timelines, it cannot be accepted. Similarly, once an offer has been accepted, the offer may not be revoked. Revocation is not effective until it is actually received by the party to whom the offer was made. Even when the offering party agrees to keep an offer open for a specific time period, the offer still may be withdrawn at any time before acceptance, unless the party to whom the offer is made has provided some sort of separate consideration for the offer to be kept open. In that situation, an option contract has been created and the parry making the offer may not revoke the offer before the agreed-upon time. * Lapse of offers. It is possible for parties to agree to set, or for the party making the offer to set, a time limit within which acceptance must occur. In such a circumstance, if the offer is not accepted within the specified time limit, it is said to have lapsed and no longer can be accepted. Even in instances in which no specific time limit for acceptance has been set, the offer will lapse after the passage of a reasonable period of time, depending upon the circumstances. * Death of party making the offer. Death of the party making an offer terminates the offer. The offer cannot be accepted after receipt of notice of the death of the party making the offer. * Consideration. This is the cause, motive, price, or impelling influence that induces each party into a contract. It is some right, interest, profit, or benefit that accrues to one party, or some forbearance, detriment, or loss undertaken by the other party. In other words, mere must be value exchanged for a promise. A valid contract requires all parties to give consideration. For example, a PT agrees to provide professional services and, in exchange, the patient promises to pay a set fee. Promises that are purely a favor or a gift are not considered adequate consideration. * Capacity. The panics must have the capacity to understand the terms of the contract into which they are entering and the consequences of the promises they are making. Generally, minor children, individuals who are mentally challenged, and individuals who are under the influence of drugs or alcohol are considered as lacking the capacity to enter into a contract. * Legality of purpose. Contracts must have a lawful purpose. For example, a contract designed to provide financial incentives for patient referrals is unlawful and will not he enforced by the courts. Such a contract is void ab initio, meaning "from the beginning." Must It Be in Writing? Putting contracts in writing is required only in very specific instances prescribed by law (eg, contracts for sale or lease of land-a requirement from the old English Statute of Frauds that was adopted by the United States). Its a matter of common sense and good business practice, however, to record in writing all contracts. It leaves less room for disagreement and argument about the provisions to which the contracting parties agreed. Your goal when drafting a contract is to create a clear, concise, and complete description of the agreement. You 15 January 2015 Page 2 of 5 ProQuest want to ensure both clarity and completeness. Clarity. The terms of the contract must be sufficiently precise, and they must be legally enforceable. It is not enough for the parties to understand in their own minds the terms of the agreement. An outsider should be able to clearly understand what the parties agreed to simply by reading the contract. Otherwise, how will a judge be able to enforce the terms in event of a dispute? Completeness. Do not assume that the terms of the contract are understood, and that they therefore needn't be spelled out in writing. If a term was important enough to discuss, it is important enough to be included in the written contract. In the interest of saving money and/or time, you may have considered using a template, such as something downloaded from the Internet. If you tap that resource, do so with caution, as one size does not fit all. Contract templates available on the Internet can serve as helpful resources for identifying issues to consider, but they usually are not comprehensive and are unlikely to be tailored to your specific needs. If a contract is not drafted with your precise situation in mind, it may not give you the flexibility and protection you really need. Also, a contract template may not reflect current law and/or the laws applicable to your state. Is Escape Possible? A party may escape obligations set forth in a contract for one of the following reasons: * A mutual or unilateral mistake mars a basic assumption upon which the contract was based. For example, a PT enters into a contract to buy office space, but after a thorough title search both the PT and the seller discover-to their mutual surprise-that the seller does not have clear title to the property. * A misrepresentation of the facts induced one of the parties to enter into the contract. For instance, a seller of practice-management software misrepresents the extent of the software's capabilities. * One of the parties entered into the contract under duress, implying that one party had inequitable leverage over the other. * The contract is deemed "unconscionable," a legal term meaning that the terms and conditions of the contract are so unfair, unreasonable, or unjust that no reasonable or informed individual would agree to them. * The contract violates public policy. Agreements violating public policy of the state or country will not be enforced by courts. * Fulfillment of the terms is rendered extremely difficult or impossible by events occurring after the contracts formation. For example, a building is to be sold to a physical therapy practice by a certain date, but hurricane damage makes it extremely unlikely that the property can be rendered structurally sound by the agreed-upon sale date. * The contract's purpose is rendered moot or irrelevant by virtue of events occurring after its formation. For example, the building in the preceding example is completely destroyed by the hurricane. The basic contract elements outlined in this column apply in most situations. It's important to understand, however, that there are nuances and exceptions based on a given contract's type and/or subject. Future columns in this occasional series will explore specific types of contracts into which PTs commonly enter. Sidebar APTA does not provide members with legal representation or advice. The information here is not to be interpreted as specific legal advice for any particular provider. Only personal legal counsel, based on applicable state and federal law, can give personal advice. 15 January 2015 Page 3 of 5 ProQuest AuthorAffiliation by Deborah Shefrin, PT, JD AuthorAffiliation Deborah Shefrin, PT, JD, was a practicing physical therapist until 1991, when she graduated from law school. She was a partner in a Chicago law firm involved in medical malpractice defense litigation and now is senior attorney in the law department of Walgreen Co in Deerfield, Illinois. She is a member of APIA'S Committee on Risk Management and Member Benefits and has served on the APIA Board of Directors and the Association's Ethics and Judicial Committee. Subject: Contracts; Contract law; Publication title: PT Volume: 14 Issue: 7 Pages: 34-36 Number of pages: 3 Publication year: 2006 15 January 2015 Page 4 of 5 ProQuest Publication date: Jul 2006 Year: 2006 Section: fiscal therapy Publisher: AMERICAN PHYSICAL THERAPY ASSOCIATION Place of publication: Alexandria Country of publication: United States Publication subject: Medical Sciences ISSN: 10655077 Source type: Trade Journals Language of publication: English Document type: Commentary ProQuest document ID: 216815631 Document URL: http://search.proquest.com/docview/216815631?accountid=35812 Copyright: Copyright American Physical Therapy Association Jul 2006 Last updated: 2014-05-25 Database: ProQuest Central _______________________________________________________________ Contact ProQuest Copyright  2015 ProQuest LLC. All rights reserved. - Terms and Conditions 15 January 2015 Page 5 of 5 ProQuest
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