Business Contracts

Articles Tagged with: Business Contracts

Failure to Use the Oxford Comma May Come Back to Haunt You

In the grammar world, the Oxford comma is of hot debate, one that has divided friends, family, and coworkers for decades. There are people who believe strongly in the Oxford comma, which is a comma used after a conjunction in a series of three or more items (i.e. turkey, mashed potatoes, and gravy), and then there are those who think that the Oxford comma—also known as the serial comma—is highly unnecessary and who would do away with the last comma entirely. While each style of writing takes one stance or another, there really is no right or wrong position, except maybe, in a court of law.

At Cloud Willis & Ellis, our business litigation attorneys help business owners draft sound contracts that leave little room for interpretation, which is why believe that the Oxford comma is an issue that needs to be addressed. A recent case involving Oakhurst Dairy and its drivers is a good example of why.

The Overtime Dispute That Was Caused by a Missing Comma

In 2014, a relatively small dispute gained notoriety when a group of drivers sued their employer, Oakhurst Dairy, for over four years of overtime pay that had been denied. Under Maine law, individuals who work more than 40 hours in a workweek must receive 1.5 times their normal pay for each hour worked overtime. As with all laws, there are some exemptions. In this case, the exemption was:

“Overtime rules do not apply to:

The canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution of:

Agricultural produce;
Meat and fish products; and
Perishable foods.”

The lack of an Oxford comma between “packing for shipment” and “or distribution of” created much room for interpretation. Drivers wanted to know, does the law make an exemption for employees who are involved in the distribution of the three listed products, or the packing for shipment or distribution of them?

Ultimately, the United States Court of Appeals for the First Circuit ruled that the missing comma created enough ambiguity for the drivers. It ordered the Portland dairy to shell out over $5 million in overtime pay to the drivers. Though a huge victory for the drivers and advocates of the Oxford comma everywhere, there is still no ruling on whether or not the verdict means that the skipped comma is an unnecessary annoyance or a defender of clarity. At Cloud Willis & Ellis, we believe that it is best to be on the safe side and use the Oxford in all contracts.

In defense of Oakhurst Dairy, the Maine Legislative Drafting Manual specifically dissuades the use of the Oxford comma, calling commas the “most misused and misunderstood punctuation marks in legal drafting and, perhaps, the English language” (Page 113). It cautions lawmakers to use the punctuation sparingly and thoughtfully. “Although authorities on punctuation may differ,” the guide continues, “when drafting Maine law or rules, don’t use a comma between the penultimate and the last item of a series.”

Despite what the manual stipulates, the fact is that the clause was ambiguous. As the drivers’ lawyer said, “It did create an ambiguity, which means you have to either add a comma or rewrite the sentence.”

Let a Skilled Attorney Help You Draft a Sound Contract

If you want to ensure that your legal contracts are binding, valid, and free from interpretation, hire an experienced business litigation attorney to help you draft it. Contact the team at Cloud Willis & Ellis, LLC via phone, email, or online contact form to schedule your consultation today.

Resources:

nytimes.com/2018/02/09/us/oxford-comma-maine.html?smid=fb-nytimes&smtyp=cur

maine.gov/legis/ros/manual/Draftman2009.pdf

mainelegislature.org/legis/statutes/26/title26sec664.html

What Is The Economic Loss Rule, And How Does It Affect Business Contracts?

The Economic Loss Rule provides that any party who only suffers from economic harm may only recover under a contractual claim, not under tort recovery, as torts traditionally only cover issues related to personal injury and/or property damage.

Regardless, parties who feel that they have been harmed in a business-related dispute will still often seek to bring negligence claims against businesses from time to time. While the Eleventh Circuit (which includes Alabama) recently upheld the Economic Loss Rule, it is important to be aware of this in drafting, negotiating, and reviewing contracts for use with clients, customers, and vendors.

What It Is

The Economic Loss Rule reflects early contract law and the fundamental concept that any claim for damages in contracts is limited to what was or should have been contemplated by the parties at the time of contracting. In other words, in a contractual relationship, the rule prevents one party from bringing a negligence claim against the other simply due to defeated expectations. Of course, there is an exception when personal injury or injury to property is involved, which opens up the door to tort-related claims. For example, under circumstances in which a product does not work, but also does not cause harm to anyone or property damage, the Economic Loss Rule would apply; i.e. the plaintiff can sue for breach of contract, but not under any product liability action. However, if that product does cause injury, the injured party can bring a product liability claim against the manufacturer.

Recent Rulings

While this may sound simple, in fact, it is still a source of litigation, and has been shaped over time: For example, in 2013, a decision that came out of the Florida Supreme Court (in response to a question posed by the Eleventh Circuit) limited the application of the rule to circumstances whereby the parties were not in privity with each other; in other words, while the historical application of the rule only allowed a tort claim where there was no contractual relationship, this decision resulted in completely barring any product liability claims for parties who had an existing contractual relationship.

Most recently, the Eleventh Circuit affirmed the Economic Loss Rule by preventing a plaintiff from filing a negligence claim against a manufacturer. The negligence claim was brought against an electronics manufacturer by a radiologist claiming that the company had been negligent because the radiologist’s MRI scanner was out of date. The radiologist claimed that the machine failed to work due to negligent repairs, however, the contract that existed between the radiologist and the manufacturer featured a servicing date that had long expired before the claim was even filed. The court dismissed the claim, as this was clearly a contract claim attempting to be recast as a negligence claim.

Draft Contracts Strategically With Experienced Attorneys

While the courts have been clear, throughout time, that the Economic Loss Rule prevents recasting contract claims as negligence claims, in order to avoid going to court in the first place, it behooves businesses to spell these terms out in contracts with clients, customers, and vendors, so as to save themselves litigation expenses, even if that litigation simply involves filing a motion to dismiss an improperly-filed claim for negligence.

At Cloud Willis & Ellis, our experienced Birmingham Business litigation attorneys can assist you with all aspects of providing counsel and guidance in navigating simple and complex contracting situations. Contact us today to set up a consultation.

Resource:

americanbar.org/publications/under_construction/2016/winter2016/economic_loss_rule.html

Independent Contractor Agreements

Legally speaking, there is a big difference in Alabama between workers who are “employees” and those who are “independent contractors”. This distinction is critical when it comes to things such as determining eligibility for pensions and workers’ compensation benefits. Therefore, how your workers are classified can make a big difference to your business. But be warned, simply having a worker sign an independent contractor agreement does not make them an independent contractor. This article describes how courts in Alabama determine whether a worker is an employee or an independent contractor, and then discusses some pros and cons associated with employing independent contractors.

How to Tell if a Worker is an Employee or an Independent Contractor

According to Workerclassification.com, courts in Alabama determine whether a worker is an employee or an independent contractor based on a common law right to control test. This means that a worker should be legally classified as an independent contractor if he or she has the right to control the means and methods by which their work is performed. It is important to note that the worker does not actually need to exercise this right, they just have to be entitled to it.

Courts determine whether a worker has the right to control the means and manner in which they do their job on a case-by-case basis. Courts often consider a variety of different factors including the following:

Amount of instruction that the company provides to the worker,
Whether the worker is responsible for hiring, paying, and firing their assistants,
Whether the employer dictates the worker’s schedule,
If the employer provides the worker with tools and materials, and
Whether the worker is paid based on the time that they work or per project.

Pros and Cons Associated With Employing an Independent Contractor

While there are a variety of pros and cons associated with employing independent contractors, a helpful article from AOL lists some of the most important, including the following.

The upsides associated with employing independent contractors often include:

Tax Benefits: Employers must pay half of their employees’ Social Security and Medicare taxes, however, employers are not required to pay these taxes for their independent contractors.
No Need to Provide Equipment and Supplies: Independent contractors generally provide their own equipment and supplies, thereby saving your business money.
Provide Fewer Benefits: Employees generally receive many more employment benefits than independent contractors do. For example, employers generally do not provide health insurance, sick days, or pensions for independent contractors.
Staffing Flexibility: Independent contractors can be employed for a specific amount of time, or for a specific project. This can be very helpful for businesses with fluctuating workloads.
Reduced Legal Risk: Employees generally have more legal rights in the workplace than independent contractors do. While independent contractors certainly still have rights and are able to sue their employers, they have fewer rights than employees do and so employing them can help reduce your business’ risk of being sued.

The downsides associated with employing independent contractors often include:

High Fees: Independent contractors are often highly skilled and in many instances you have to pay more for their services than you would for an employee to perform the same job.
Intellectual Property: Independent contractors sometimes have a legal claim to the intellectual property that they create. However, this often depends on the terms of the independent contractor’s agreement.
Less Control: Employers have more control over employees than independent contractors when it comes to determining how and when work is completed.

Need Legal Advice?

If your business is located in Alabama and you are interested in drafting binding employment and independent contractor agreements, contact the experienced Birmingham business attorneys at Cloud Willis & Ellis, LLC today.

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