The Importance of Putting it in Writing

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One of the most common causes of legal disputes is the failure to get an agreement, however small, in writing. Today, on the Cornerstone Law Blog, we want to tackle why it is so important to put your thoughts in writing when you and a friend or business associate are agreeing to a contract.

To begin with, it’s important to note that agreements are typically binding even if they are not in writing. Contrary to popular belief, most oral agreements are legally enforceable—if you can prove them (although there are exceptions, such as when dealing with land, with contracts for goods over a certain price, and in certain industries such as home improvement).

So why is it important to get your agreement in writing if it can be enforced even without a written document?

Why get it in writing?

  1. The most important reason is it is hard to prove what an oral agreement was for.

    Unscrupulous parties can lie about what was agreed to, and even when everyone is being honest, people’s memories tend to fade surprisingly quickly. Relying on someone else’s memory to agree with your own is a recipe for disaster in enforcing your contracts.

  2. Misunderstandings are harder to smoke out and deal with when a contract is not written down.

    It may sound funny, but there have been many lawsuits litigated over something as simple as the meaning of “here.” If someone agreed to bring a product “here,” where is “here?” If the agreement was made over the phone, one person may have assumed that “here” meant someone’s home, when in fact they meant their business some many miles away. Sometimes this type of disagreement can be cleared up easily, but in other cases it can be a mistake that can cost substantial sums of money.

    The point is this: without putting something in writing and taking the time to clarify simple points of misunderstanding, you can end up in a contract dispute that neither party brought about by their malice or ill will.

  3. It helps you to think about things that you weren’t really considering when you first made the contract.

    If two people get together and agree orally to a “handshake deal,” they may not be thinking about questions such as, “What happens if a pandemic shuts down the world and one side can’t deliver the product because the government won’t allow it?”

    And what happens if there is a good-faith dispute over the contract? Do the two of you first have to go and deal with it in front of a board of arbiters, or do you go straight to court? And which court? Where can you be sued? What do you do if a labor shortage or a war in another country suddenly makes it impossible to get the raw materials necessary to produce the product you’ve ordered? 

There are hundreds of potential questions that a good transactional lawyer can help you to work your way through. Even without the involvement of a lawyer, there are things you may think of as you put the agreement in writing that will help you to confront potential misunderstandings and disagreements that will cause problems down the road. 

How can you put it in writing without being overly difficult?

Sometimes business owners in particular are concerned that continually putting contracts in front of their clients or customers will cause them concern and will scare them off of working with them further. In most cases, this concern is not well-founded.

Most customers understand and even appreciate the time that you will take to put things in writing. But if they don’t or if you are concerned that the time necessary to reach a written agreement will make it difficult for you to continually get new contracts drafted, one approach is simply to put everything into an email or even a text message.

Once again, putting everything in writing will help you to confront disagreements that may arise between you and the other party. In most cases, it is best practice is to say, “Are you in agreement with all of these things?” at the end of the email (or something to that effect). Getting them to respond back will in many cases create a binding written contract between you two. 

Note: this article is not meant as legal advice.

There are specialized areas of law where a simple email or text message is not sufficient. It’s important that you talk to a lawyer about your specific concerns. But in the meantime, we hope that the tips in this article will help you in your day to day business and personal affairs to ensure that your contractual agreements are being memorialized in writing.

For help in drafting or reviewing contracts, contact Cornerstone Law Firm today.

Cornerstone Law Firm in the Greater Reading Merchandiser

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Cornerstone Law Firm is honored to serve the Berks County, Pennsylvania and beyond. We’re happy to solve your legal problems, even through the uncertainty and stress of the current coronavirus (COVID-19).

In this month’s Greater Reading Merchandiser, we’re sharing a little bit about ourselves and what we’re doing to make sure your legal needs are still met! Check out are ad:

april 2020 merchandiser

For more information about how we can serve you, contact us today!

Call Cornerstone Law Firm

Injunctions for Breach of Contract

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Contracts are formed when two or more parties reach an agreement that involves an exchange of promises. When one party breaks their promise and fails to reform their obligation on their contract the other party to the contract often asks, “Can I seek an injunction requiring the other party to perform?”

Injunctions Court Orders Requiring Performance

An injunction is a court order that requires someone to refrain from doing something you don’t want them to do or requires them to do something that you want them to do. We’ve discussed injunctions elsewhere on the blog. However, it is important to know that injunctions are typically very difficult to get in contract cases, even in fairly extreme situations. Injunctions require an irreparable harm (that is, something other than monetary damages).

In other words, you have to be able to show a court that if the court doesn’t act, you will suffer damages that can’t be adequately compensated by money. In most situations involving a breach of contract, that is not possible. Rather, if a party breaks their promise, they can pay you the damages that theirs breach has caused you.

Damages

There are several different ways that you can measure how you have been financially damaged by someone’s failure to perform their agreement under a contract. The bottom line is the court will seek to place you in a position where you are made whole and put in the same position that you would have been in had the contract been performed. However, this doesn’t typically include repayment of your legal fees, the costs and frustration of finding a replacement party to perform the contract for you, nor anything for the sense of moral outrage that people often feel when a promise to perform under a contract is broken.

Conclusion

You may not be able to obtain an injunction regarding your contract, but this doesn’t mean that you should ignore the problem or not pursue it in court. Legal action regarding a breach of contract will often jolt the other party into action. At the very least, it will allow you to recover the damages you’ve incurred as a result of what’s happened.

At Cornerstone Law Firm, our litigation attorneys can help you analyze your case. Call today to discuss your situation and let us know how we can help you. 

“I’ve been Charged with a Crime in Union County. What Now?”

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If you’ve been charged with a crime in Union County, Pennsylvania and you’re wondering what happens next in the process, you’ve come to the right place. The responsibility of filing charges in Union County, Pennsylvania falls to local police departments as well as the Pennsylvania State Police who have jurisdiction to file charges. But ultimately the responsibility of proceeding with those charges belongs to the District Attorney for Union County, Pete Johnson.

Here’s the process that you will encounter if you’ve been charged with a crime.

Preliminary Arraignment and Preliminary Hearing

union county court

We’ve written before about preliminary arraignments and preliminary hearings in criminal cases. Union County’s process is not different in that the preliminary arraignment and preliminary hearing are the defendant’s first opportunity to hear the charges against him or her and to hear the evidence that the Commonwealth has to prove the crime.

The bar for the Commonwealth to prove their case in a preliminary hearing is very low. The Commonwealth need only prove that they have probable cause for bringing the charges. If they’re able to prove that, then the charges move forward to more serious stages of criminal litigation.

Omnibus Pretrial Motion

Assuming the Commonwealth is able to meet its burden and move past the preliminary hearing, the next stage in the process is for the defendant if they wish to request discovery and file an omnibus pretrial motion. This motion allows the defendant to challenge the charges against them and to have them assessed at a much higher standard that is construed against the Commonwealth.

If the Commonwealth will be unable to meet its burden, the charges will be dismissed. Omnibus pretrial motions are a unique opportunity for criminal defendants to bring a motion to suppress evidence or to bring a habeas corpus motion to have the charges dismissed entirely.

Disposition and Trial

Most cases in Union County, Pennsylvania are resolved at a disposition hearing long before trial. This is an opportunity to reach a plea agreement with the Commonwealth, enter into a diversionary program such as ARD (accelerated rehabilitative disposition) or to reach some other arrangement. Disposition hearings are typically where an experienced attorney will have worked out the best deal possible for a client.

However, many criminal defendants don’t wish to plead guilty. They want to go forward to trial. This might be because the deal offered is not very good or because they believe that in principle they are right and shouldn’t have to agree to some sort of deal. In this case, it is absolutely vital to have an experienced criminal defense attorney who is able to go forward to trial and handle the charges by aggressively challenging the Commonwealth’s case.

Conclusion

At Cornerstone Law Firm, we help criminal defendants in Union County to defend against criminal charges by defending them at all stages in the litigation process, including at trial. Call us today to discuss your charges and to have a free consultation on what we can do for you.

What is Impeachment?

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Continuing our “Cornerstone on the Constitution” series, we have received a number of requests to answer, “What is impeachment? How does it work? What are the results of the impeachment process?” Although impeachment is one of the hottest political topics in America right now, it is relatively misunderstood.

Impeachment is authorized in the Constitution for all officers of the government of the executive and judicial branches. While the House and Senate retain the power to expel their own members by a vote of their own house, the members of the executive and judicial branches have to be removed by the specific process of a majority vote in the House and two-thirds majority in the Senate. This is done to protect the independence of the executive and judiciary from the legislative branch.

Background

impeachment

It may be hard to believe, but at the founding of the country, the founding fathers were mostly concerned about the potential for abusive power in the legislative branch. They believed that Congress would attempt to arrogate all power to itself and rule the country without the input of the other two branches.

Indeed, Congress is the most powerful branch in the Constitutional frame of government. Congress can limit the president’s salary, define his authority over foreign affairs to a large degree, fire all of his staff and even auction off the White House if they so choose! Accordingly, it’s not surprising that Congress also retains the power to impeach the president if they believe that the president is abusing his power.

Cause for Impeachment

The Constitution allows impeachment of the president in the case of “high crimes and misdemeanors.” Despite the best efforts of historians and legal scholars, this phrase remains largely undefined. It certainly seems to imply that an actual crime must have been committed, but the debates in the Constitutional Convention about the phrase suggest that it was meant to be a check on an abuse of political power even if it were not necessarily able to be defined as a crime.

The use of the word “high” in response to these crimes strongly supports the argument that these are meant to be more than “minor” crimes that are the subject of an indictment. Simply put, if the president is caught jay-walking, that is probably not going to be legitimate grounds for impeachment. 

However, the situation is somewhat complicated by the fact that the Supreme Court has ruled that federal courts may not interfere with the process of impeachment. Put more simply, they have determined that it is a “political question” that is left to the legislative branch and the legislative branch alone to determine. Accordingly, there is no right of appeal from the removal from impeachment, and it is permanent. 

Impeachment Myths

So, let’s tackle a couple of common myths about impeachment.

  1. First, impeachment is not removal from office. Think of impeachment as formal charges being brought against the president of the United States by the House. A group of “prosecutors” from the House are selected to bring the case against the president, and the Senate is the jury.

    The Chief Justice acts as the judge in any trial would act—ruling on the admissibility of evidence and keeping order in the Senate chamber. This is the only time that a judicial official is constitutionally mandated (or permitted) to preside over any proceeding in any other branch of the government.
  2. No, impeaching a President doesn’t mean he is ineligible to be President again. Conversely, it also doesn’t mean he can run for a third term. And impeachment does not remove the president—it only sets up his trial in the Senate. Our two previously-impeached presidents were not removed from office and served out their term in the White House.

No one can say for sure how this impeachment process will end up, but we hope this overview helps you understand this very important constitutional process!

Independent Contractor vs. Employee – Does it Matter?

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If you have signed a contract of employment, you may have noticed a line that stated you are an “independent contractor” or an employee. Perhaps it’s a full paragraph dedicated to the topic, or maybe it’s simply assumed in the title of the agreement. When difficulties arise in an employment relationship, many people wonder, what is the significance of this determination of independent contractor vs. employee?

People are often surprised to learn that the mere designation of an employee as a “1099” employee (named for the IRS form on which independent contractors report their income), and even the filing of taxes in accordance with that designation, does not necessarily mean that the individual is actually an independent contractor rather than an employee.

As a general rule, employees have greater legal rights than independent contractors. They can bring suit under a range of federal and state laws for unpaid wages that entitle them to financial penalties and attorneys’ fees. On the other hand, contractors often have to resort to common law claims, such as breach of contract. In addition, some government departments will help employees recover unpaid wages, while contractors are largely on their own.

Here are several factors that a court will consider in determining whether someone is an independent contractor (a 1099) or an employee. None of these factors is conclusive, on its own but rather they are all considered together by a court, in addition to other factors:

1. Exclusive Employment

independent contractor

One of the most important factors in determining whether someone is an employee or an independent contractor is whether their employment is required to be exclusive with that employer.

For example: If you work at a doctor’s office and your employer requires you to sign an agreement that you will not work at any other medical facility, or in even more extreme cases, that you will not work at any other job without your employer’s permission, then this tends to suggest that you are an “employee.”

2. Right of Supervision

Independent contractors are generally an unsupervised bunch. A true independent contractor is someone who is hired to come into a job site, do a job, and then leave, even if it’s on a regular basis.

For example: The engineer who repairs machines at a shop may come in only as required for individual repairs. No one stands over his shoulder and tells him what to do, how long to be there, what hours to put in, or anything else like that. Rather, he is hired for specific jobs, brought in, and then he leaves.

The right to control someone’s work and to tell them what to do, when to be at the work site, when to leave, what to wear, and many other incidentals of employment, imply a direct employment relationship rather than that of an independent contractor. Once again, none of these factors are binding, but this is another consideration. 

3. How the Worker is Paid

Less important factors, such as payment, should also be considered. Are you paid on a salary, a commission, or are you paid by some other arrangement? Do you invoice the company or do they determine your pay for you? Each of these is an important factor in determining whether you’re an independent contractor or an employee.

4. Work in A Specialized Field

In some cases, statutory law controls whether you are an employee or an independent contractor. For example, due to the abuse of “independent contractor” status by employers, the legislature in Pennsylvania has passed an important statute governing whether construction workers are employees or independent contractors.

Many construction employers prefer to classify all of their employees as independent contractors on the idea that they then can avoid Worker’s Compensation payments. This has been determined to be unlawful in Pennsylvania, and the statute provides for a specific set of factors that must be considered. Thus, if you’re in construction or any other number of specialized and regulated fields, your status as an employee or independent contractor may depend on a more specialized analysis.

Conclusion

It is important to note that nothing in this article should be taken as legal advice. Every situation involving independent contractors and employees is unique and depends on more factors than we can list here. However, the important takeaway from this article is this: just because you’re classified as an independent contractor doesn’t mean that you actually are and vice versa. Properly setting up an employment arrangement from the start is important, and even after things have gone south between an employer and an employee, making these determinations can be important. 

Furthermore, if you find that there are statutory protections for you as an employee that are not being given you, your employer’s response that you’re an independent contractor is not necessarily the final word. Call the attorneys at Cornerstone Law Firm, LLC today. We can discuss how we can clarify your existing relationship, protect you if your rights are being violated, or how we can ensure a strong legal relationship with your workers.

My Partner Froze Me Out!: What to Do in A Shareholder Dispute

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When you run a business with someone else, conflicts can arise. Most business partners should be able to work out there differences together, but unfortunately, it’s a fact of life that this isn’t always the case.

Occasionally, when things get really bad, one partner or shareholder or director will make a poor decision and “freeze out” the other owner of the company. This may happen in a physical way where the part owner changes the locks on the building, or in a less obvious way, such as where one owner tells all of the employees to stop taking direction from the other owner.

If you are the frozen-out shareholder or director, you have some important decisions to make. Here are four things that will impact how your case will develop if you’ve been frozen out of your company:

shareholder dispute

1. What type of business entity do you own?

You may not have paid much attention in the past on whether your company is a corporation, an LLC, or an unorganized partnership, but now is the time to figure that out and to pay close attention to it. The type of entity that you are a part owner of will have a dramatic impact on the type of claims that you’re going to bring and on the best strategy to pursue in litigation.

These and many other questions will influence your options. In the case of a corporation, Pennsylvania statutes provide for the proper process to follow in objecting to many corporate actions. Some actions may be governed by other rules of law, as well.

In regards to an LLC or a partnership, the rules are based more heavily on private documents between the parties, but are also governed by certain fundamental legal principals. In short, knowing what type of entity you own is an important piece to the overall puzzle.

2. What type of ownership interest do you have in the company?

More importantly, what is your ownership interest in the company? If the company is a corporation, are you a voting or non-voting shareholder? Do you have a contractual right to be on the board of directors under your corporation’s bylaws, or under some other agreement? If the company is an LLC, do you have an Operating Agreement? And is your Membership of the same class as the Member who froze you out?

What percentage owner are you? Do you own half? Less than half? If so, you are a “minority shareholder,” meaning that you own less than a controlling percentage of the company. This means the Court will have to apply certain doctrines to protect your rights if a “controlling shareholder” or controlling ownership group are acting oppressively. Of course, if you own a controlling percentage, your remedies may be even stronger if you were frozen out.

3. Do you want to return to your company? Or, do you want a payout?

An important decision that a frozen-out owner will often have to make is whether they want to return to the company as an owner, or whether they essentially want to be bought out of their interest in the company. This is a tough decision to make and may be very difficult in the bitter circumstances of an acrimonious dispute between shareholders or partners.

However, deciding whether you want to reclaim your rightful place in the company or simply accept money for the damages you’ve suffered will help to determine the course of action that you should take starting on day one.  

4. What type of freeze-out occurred?

We referenced at the beginning of this article that there are many ways to be frozen out. Not all freeze-outs are made equal. If you are frozen out by a changing of the locks, you may need to approach the litigation with an injunction from the Court requiring that you be allowed to re-enter the premises, or you may need to take other legal and aggressive action immediately. If you’re the victim of a “soft” freeze-out, where other owners are undermining you and depriving you of the control you are legally entitled to, the approach may be different.

The actions of your co-owner or partners will dictate your strategy in some respects, but if you haven’t been completely frozen-out, that may also give you the opportunity to make important and strategic decisions to protect your rights.

Conclusion: Call the Cornerstone Law Firm to discuss your case

At Cornerstone Law Firm, we handle freeze-out disputes. We have experience in negotiating, litigating and avoiding disputes between partners and owners. We have represented minority owners frozen out of LLCs, partnerships and corporations, and have handled multi-million-dollar business disputes.

Call us today for a free, confidential consultation, and we can discuss how we can help you solve your problem.

6 Benefits to Limited Liability Companies

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What is an LLC, and why should you get one? LLCs are a powerful and flexible corporate form that provide incredible opportunities and protection for business owners. Even if you’re a small business, an LLC can provide a platform to grow and protect your business—and if you’re large, it’s definitely time to look at the benefits an LLC can provide.

 

1. LLCs Shield You from Liability

LLC stands for Limited Liability Company. When you form an LLC, you’re forming a company that limits your liability. LLCs are a “shield” that limit your legal liability for business decisions and mistakes that might otherwise harm you or your family.

For example, let’s say your business is installing hot water heaters. You sign a contract to install a hot water heater in a large office building, and you install the heater, but unfortunately, you are having a bad day, and you make a mistake, and the heater bursts and causes flooding in the basement of this office, or it causes someone to get burned, or maybe it just doesn’t work, and the business loses money because they don’t have hot water for a few days.

So what happens? You get sued—you do, personally—because you messed up. You breached a contract, your negligence caused an injury, your product that you re-sell subjects you to strict products liability, or all of the above. When this business and the injured employee and the office building’s owner or property management company sue you, they’re suing you, personally. If they win, they can collect that judgment by putting a lien on your house, by attaching your bank account, etc.

Now how would an LLC have helped you here? Simply put, if you run a company and make your contracts in the company’s name, then your breach of contract and other issues result in a suit against the company. That means your personal assets are not at risk. You aren’t personally being sued, you don’t personally have to report lawsuits against you personally if you’re seeking a mortgage, you can sleep a little better at night. It doesn’t mean your business won’t suffer from the lawsuit, it just means there’s a sealed wall between you and your company. Your company, in other words, limits your liability.

It’s important to note this doesn’t mean you can’t ever be sued personally for your actions, but if you set up your LLC properly, you will eliminate most of the situations in which you can be personally sued.

2. LLCs Allow Complex Forms of Ownership

If you’re a small business with a single owner, you can skip this one, but for family-owned businesses or startups with your college buddies that have quickly become lop-sided, an LLC allows you to setup virtually any ownership structure that you can dream of.

Does one person handle one aspect of the business? Does someone do most of the day-to-day management, while others contributions are physical assets or money? Such “lopsided” investments can be difficult to manage without an LLC as everyone’s contribution should be valued, but not everyone needs their “hands in the stew” of day-to-day management. Setting up your LLC with a board of directors or a day-to-day manager but giving financial ownership to those who’ve invested allows you to solicit investment without giving away power.

Similarly, using LLCs to shield risky investments from assets allows a business to grow in a more stable fashion. One example is setting up an LLC to protect real estate investments from one another. Using an LLC to purchase property, and setting up separate LLCs for each property allows a real estate business to protect one piece of property from the dangers that might come from another. If an injury occurs on one property, there is no liability attaching to a property owned by another LLC under the same company.

3. LLCs allow Outside Investment

Do you want to take on angel investors, or sell stock? The terminology is different (stock refers to a corporation’s ownership structure), but the function is the same. By offering investors a different class of “membership” (ownership), you can sell financial stake in your company without giving up control to the investors.

4. LLCs can be sold

Do you foresee the possibility that you might want to sell your business down the road? Your business may be satisfying now, but in thirty years, will you want to consider a second career? Would you like to be bought out for a huge amount of money in a few years by a company that thinks they can do something huge with your startup? Setting up an LLC makes it much easier to sell your business to someone who wants to take over your client list and assets one day.

Technically, you can always sell your business, even without an LLC. But many lawyers will advise a potential buyer to look elsewhere if your business is not well organized. Having an LLC that is properly setup and running encourages a potential buyer that their purchase will be easy to roll over into a new or existing business.

5. LLCs Let you Take Risks and Go Bankrupt

I realize this sounds a little crazy, but have you ever wanted to try a risky business? Have you ever wanted to take a leap? As discussed in number one, above, forming an LLC allows you to protect your personal assets. If your business goes belly-up, you aren’t putting your house at risk, or your personal credit.

Note, however, that this point is somewhat limited. Yes, the LLC will be liable for debts, but if you’re taking out enormous loans for a young LLC, you may be forced to co-sign. As always, it’s not just forming the LLC that matters—it’s how you manage and run it.

6. LLCs are the New Corporations

What about corporations? Should you consider one of those instead of an LLC? In short, LLCs are a new corporate form that has replaced corporations. Many companies will continue to run as corporations—and there’s nothing wrong with that. But new businesses starting up today should use LLCs except in very limited circumstances (where you expect to be publicly traded, or where you want to be nonprofit). Even those exceptions may soon be reduced.

So should you form an LLC?

Forming an LLC is almost never a bad idea, but the return on investment depends on the nature of your business and what your various risks are. Call the Cornerstone Law Firm, LLC today, and let’s talk about how we can help your business grow.