5 Necessary Legal Terms Every Owner Should Know

Some of the most misunderstood legal terms owners encounter

Legal Terms Every Business Owner Should Know
Business executives should be aware of the potential consequences of their conduct.  Savvy business owners, executives and managers should be alert to certain legal terms that can affect them later on in the business relationship.

“In fact, certain words and terms may mean the opposite in a legal sense,” says Elliott Portman, a partner with the Long Island Law Firm of Roe Taroff Taitz & Portman, LLP.

“Simply throwing around terms that sound great might cause confusion when it comes to a legal dispute or a courtroom.”

To help business owners, executives and managers avoid a “frustration of purpose,”  Portman has compiled a list of the Five Legal Terms Every Business Owner Should Know.

  1. Acceleration – Moving at high speed towards a destination or goal is usually a good thing. However, in the context of a contract or promissory note, acceleration can be bad. It is defined as when a payment or debt is moved forward in time based upon the failure of the indebted party to make payment as agreed. Upon default, the entire balance of the debt can immediately become payable as a penalty for failure to abide by the terms of the original agreement.
  2. Accord and satisfaction – Accord can mean pleasant agreement all around during a business meeting, but it also refers to a creditor’s agreement to accept less than is legally due in order to wrap up a claim for monies owed. Once the accord and satisfaction is made and the amount paid, even though it is less than claimed owed, the debt is wiped out since the new agreement (accord) and payment (the satisfaction) replaces the original obligation. It is often used by creditors with “a bird in the hand is worth two in the bush” practicality.
  3. Bad Faith – Blind Faith was the blues/rock group that Eric Clapton formed after he left Cream. That was a very good thing. Bad Faith, on the other hand, is an intentional dishonest act by one party to a business transaction. It can be not fulfilling legal or contractual obligations, misleading the other side, entering into an agreement without the intention or means to fulfill it, or violating basic standards of honesty in dealing with others. If a bad faith finding of fact is made by a Judge, the party found in bad faith can be punished either monetarily or in a manner determined to be in the best interest of the aggrieved party.
  4. Frustration of purpose – To own a business, like being in love, is to suffer frustration from time to time. When unexpected events arise which make a contract impossible to be performed, the frustrated party may decide to rescind the contract. Under the right circumstances, the frustrated party will not have to pay damages to the other side. An example would be a building that burns down prior to the date for closing of title.
  5. Implied Contract – Circumstances can show that there was a binding contract between parties, even if not reduced to writing. If a Judge finds it would be unfair to the performing party to deny the contract and/or that the non-performing party would obtain an unjust enrichment based on denial of the contract, a finding of an implied contract can be found. For example, an implied contract can be found where there is discussion between the parties about doing business, some agreement as to terms not reduced to writing and then one party ships goods or performs services and the receiving party does not pay.

“There are many legal terms that come up during the normal course of business,” says Portman. “My recommendation is to work with an attorney who has experience in business law in order to avoid miscommunications.”

Want to learn more? The law firm has also made a longer list of common legal terms available for complimentary download from its website.

 

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