All successful California businesses depend on California contract law every day. After all, basically every business transaction is carried out through contractual agreements. If companies could not depend on predictable outcomes from their contracts, the economy wouldn’t function smoothly. That’s why every contract must be enforceable and interpreted in a consistent manner.
Of course, contract law is governed heavily by each individual contract, which is why businesses often work with experienced California contract lawyers to draft the best contracts for each unique business situation. Through Priori Legal’s curated, on-demand legal marketplace, you can find experienced, talented contracts lawyers for all your company's needs.
Under California civil code, four essential elements must be present in order to have a valid contract:
Parties capable of consenting to a contract
A lawful object or purpose
Sufficient cause or consideration (payment)
These four elements are vital for any agreement. If a contract dispute goes to court, however, the burden of proof may by slightly different. California contract law stipulates that juries ruling on these four elements can consider a contract to be valid if the parties agreed to the terms of the contract and they exchanged something of value, but only if the contract terms were clear enough that both parties could understand what each was required to do. This additional caveat is most important when establishing whether or not a contract that involves less legally sophisticated parties dealing with more legally sophisticated parties, such as consumer contracts.
Most contracts that fall under traditional California contract law are essentially customer contracts. These contracts allow people to buy and sell goods and services in partnership with consumers and other companies. This can be as simple as a subscription agreement or as complex as a multiple-year services agreement.
B2B contracts are generally the most sophisticated contracts. Because both parties are assumed by law to have negotiation power, few laws govern the terms that may be available when drafting such agreements. Once a contract has been signed, it will almost always be enforced as-is in California courts. Even if an element of the contract is invalid or illegal, the tendency will be to enforce as much of the contract as is valid, regardless.
Consumer customer contracts have more limitations under California contract law than B2B contracts due to consumer protection laws. The FTC and the California Department of Consumer Affairs ensure that less legally sophisticated and powerful consumers are not unfairly taken advantage of by companies. Contract clauses that prohibit litigation or impose large payment penalties may be common in B2B contracts, but they are considered to overly favor the company and are thus illegal in consumer contracts.
In California, consumer protections are particularly strong. The California Consumers Legal Remedies Act makes many things illegal that may not be elsewhere in the U.S., including misrepresenting the source or condition of goods and services, advertising goods without having sufficient stock to meet demand, offering rebates with hidden conditions and misrepresenting the authority of a salesman to close a deal. Every contract signed with California consumers must comply with the California Consumers Legal Remedies Act, even if the governing law is elsewhere, so all companies must be aware of the restrictions under this law, as well as federal consumer protections established by the FTC.
Contracts are only worth having if they can be enforced. That’s why California contract law provides for remedies if there has been a breach of contract, such as nonperformance or nonpayment by a party. To bring a breach of contract claim in California, your California contract lawyer must prove:
the parties entered into a valid contract,
the plaintiff did everything that was required by them under the contract,
the defendant did not fulfill everything required by them under the contract, and
the plaintiff was harmed in some way by the defendant’s failure to perform as expected.
If these conditions are met, you may be entitled to damages in the amount of your losses, recovery of lost profit, forced fulfillment of the contract, interest, attorneys’ fees, or even punitive damages in the case of fraud or other illegal activity.
No. Oral contracts are enforceable in California, too. Implicit contracts, where the conduct of the parties establishes that there must be an implicit contract, can also be enforced. If all the elements of a valid contract are present, California courts will enforce the contract and award damages regardless of the absence of a formal written contract.
It depends. Most contracts have a “governing law” clause which establishes which state’s laws will apply when interpreting the contract. Whatever you agree upon will stand. Of course, not every contract remembers to include this provision. If your contract does not establish a governing law, the courts will decide which state’s laws have a closer connection to the agreement.