Retired Judge Dale has it wrong. Direct Response to Retired Judge Dale’s Post Of November 26 2013 pertaining NDA (contract)

hi John,

Retired Judge Dale has it wrong.

Direct Response to Retired Judge Dale’s Post Of November 26 2013 pertaining NDA (contract)

Who Can Enforce A Contract

Of course, contracting parties can enforce contracts between themselves, as can certain third-party beneficiaries. But, then the questions arise -who is a party to a contract, and what type of third-party beneficiary enjoys the right to enforce? How these questions are answered in practice is very important.

"If the first rule of medicine is 'Do no harm,' the first rule of contracting should be 'Read the documents.''' Villacreses v. Molinari, 132 Cal.ApPAth 1223, 1225 (2005). In Villacreses, the contracting parties agreed "'to have neutral arbitration of all disputes to which it applies....'''But turns out-there was no "it." "[T]he mysterious 'it'...is intended to refer to an arbitration provision that the parties [did not put into the contract]." So, while it was lovely that the parties agreed to arbitrate everything to which their arbitration agreement applied, their arbitration agreement applied to nothing, because there was no arbitration agreement.

Likewise, it is not unusual to receive in discovery, or have attached to pleadings, unsigned, or partially signed "contracts." And someone who does not sign the contract "is not a party to the contract," Turner Gas Co. v. Workmen's Camp. Appeals Bd. 47 Cal. App. 3d 286, 291-292 (1975). This questions the worth of unsigned or partially signed documents on the issue of who can enforce a contract. On the other hand, an unsigned contract or a contract signed by someone other than the party attempting to enforce a contract can be golden in that it can prove who cannot enforce that contract.

Unsigned, or partially signed "contracts." And someone who does not sign the contract "is not a party to the contract," Turner Gas Co. v. Workmen's Camp. Appeals Bd. 47  Cal. App. 3d 286, 291-292 (1975). This questions the worth of unsigned or partially signed documents on the issue of who can enforce a contract. On the other hand, an unsigned contract or a contract signed by someone other than the party attempting to enforce a contract can be golden in that it can prove who cannot enforce that contract.

The law of agency allows an agent, acting within authority, to bind a principal to a contract without binding himself. Civil Code Section 2337. In a 1859 case involving the First African Methodist Episcopal Church, the state Supreme Court observed, "If A says, 'On behalf of B, and for value received by him, I, A, as agent for B, promise to pay C one hundred dollars,' it would seem that this is the note of B." Haskell v. Cornish 13 Cal. 35 (1859). "Where the signature as agent and not as a principal appears on the face of the contract, the principal is liable and not the agent." Lippert v. Bailey 241 Cal.App.2d 376 (1996).

For example, in Carlesimo v. Scheibel, the court observed that had the purported agent "appended the preposition 'by' immediately before his signature, there would be no doubt at all that the contract would have disclosed, on its face, not only that appellant was dealing with the [principal], but that [the alleged agent] was signing as an agent and not as a principal. Where that appears on the face of the contract the [principal] is liable and the agent is not." (87 Cal.App.2d 482, 487 (1948).

"The orthodox rule requires privity of contract between the parties in a [contract] action." Klein v. Duchess Sandwich Co. 14 Ca1.2d 272, 277 (1939); see also Superior Gunite v. Ralph Mitzel Inc. 117 Cal.ApP-4th 301, 317(2004). Privity of contract is rarely defined in cases. Perhaps that is because some leave law school believing "privity" to be a never-ending circle: Privity is the relationship between contracting parties, and the relationship between contracting parties is privity.

The word "privity" is best understood if one knows that it and the word "private" share the Latin root "privus" The American Heritage College Dictionary, 3rd ed.); and, that a common definition of "privity" is: "Knowledge shared with another...regarding a private matter: usually implying consent or concurrence." (Funk & Wagnalls Standard Dictionary Comprehensive, Inte1'11ational Edition.)

Black's Law Dictionary defines privity of contract, as "that connection or relationship which exists between two or more contracting parties." This legal definition, when understood with the foundational understanding of the root privus, and with the lay meaning of privity, is properly recognized as the consensual, private, consideration-supported relationship between parties to an agreement.

In addition, the Uniform Commercial Code has introduced the concept of vertical privity. Under California Commercial Code Section 2314, the implied warranty provision, a plaintiff asserting breach of warrant claims must stand in vertical contractual privity with the defendant. "The term 'vertical privity' refers to links the chain of distribution of goods." Anunziato v. eMachines Inc., 402 F. Supp. 2d 1133, 1141 (C.D. Cal. 2005). 

Last, an intended beneficiary can enforce a contract as a third party. There are two types of such intended beneficiaries, a creditor beneficiary, and a donee beneficiary. City & Suburban Mgmt. Corp. v. First Bank 959 Fed.Supp. 660, 665 (1997). "A person cannot be a creditor beneficiary unless the promisor's performance of the contract will discharge some form of legal duty owed to the beneficiary by the promisee.... A person is a donee beneficiary only if the promisee's contractual intent is either to make a gift to him or to confer on him a right against the promisor." Martinez v. Socoma Cos. 11 Ca1.3d 394, 400-402 (1974). An incidental beneficiary has no right to enforce a contract as a third party beneficiary. Martinez v. Socoma Cos. 11 Cal.3d 394, 408 (1974).

Signed, sealed and delivered: the deed is done; When executing deeds, always remember that what matters most is not signing or dating, but delivery. If you are executing a deed which you do not intend to become fully effective immediately, ensure that you clearly state to the other parties (preferably in writing) any conditions attaching to delivery. In most cases, it will be sufficient for the deed to contain a provision stating that the parties do not intend delivery to take place until they insert the date of the document. At the very least, it can be agreed that a deed executed by one party is sent to the other party on condition that it is held to the order of the first party until both parties agree that it comes into force.

In practice, very similar issues will arise in relation to ordinary contracts; always be clear about when they are intended to come into effect, regardless of signing and dating.

A specific issue can arise in relation to mortgages and charges executed by companies. Particulars of these must be delivered to the Registrar of Companies within 21 days of being created. If they are not, the security is rendered unenforceable against a liquidator, administrator or creditor of the company. In addition, the company and defaulting directors face fines. It is sometimes overlooked that the 21 day period starts to run as soon as the mortgage or charge is executed (if it is not made clear that delivery is not to occur until later), even if this is done in advance of the document being dated.

DEED defined: conveyancing, contracts. A writing or instrument, under seal, containing some contract or agreement, and which has been delivered by the parties. Co. Litt. 171; 2 Bl. Com. 295; Shep. Touch. 50. This applies to all instruments in writing, under seal, whether they relate to the conveyance of lands, or to any other matter; a bond, a single bill, an agreement in writing, or any other contract whatever, when reduced to writing, which writing is sealed and delivered, is as much a deed as any conveyance of land. 2 Serg. & Rawle, 504; 1 Mood. Cr, Cas. 57; 5 Dana, 365; 1 How. Miss. R. 154; 1 McMullan, 373. Signing is not necessary at common law to make a deed. 2 Ev. Poth. 165; 11 Co. Rep. 278 6 S. & R. 311. 11. The circumstances necessarily attendant upon a valid deed, are the following: 1. It must be written or printed on parchment or paper. Litt. 229, a; 2 Bl. Com. 297. 2. There must be sufficient parties. 3. A proper subject-matter which is the object of the grant. 4. A. sufficient consideration. 5. An agreement properly set forth. 6. It must be read, if desired. 7. It must be signed and sealed. 8. It must be delivered. 9. And attested by witnesses. 10. It should be properly acknowledged before a competent officer. 11. It ought to be recorded.

ACKNOWLEDGMENT defined: conveyancing The act of the grantor going before a competent officer, and declaring the instrument to be his act or deed, and desiring the same to be recorded as such. The certificate of the officer on the instrument, that such a declaration has been made to him, is also called an acknowledgment. The acknowledgment or due proof of the instrument by witnesses, must be made before it can be put upon record.

Illinois: Before a judge or justice of the supreme or district courts of the United States, a commissioner authorized to take acknowledgments, a judge or justice of the supreme, superior or district court of any of the United States or territories, a justice of the peace, the clerk of a court of record, mayor of a city, or notary public; the last three shall give a certificate under their official seal.

The certificate must state that the party is known to the officer, or that his identity has been proved by a credible witness, naming him. When the acknowledgment is taken by a justice of the peace of the state, residing in the county where the lands lie, no other certificate is required than his own; when he resides in another county, there shall be a certificate of the clerk of the county commissioners court of the proper county, under seal, to his official capacity. When the justice of the peace taking the acknowledgment resides out of the state, there shall be added to the deed a certificate of the proper clerk, that the person officiating is a justice of the peace. The deed of a feme covert is acknowledged before the same officers. The certificate must state that she is known to the officer, or that her identity has been proved by a witness who must be named; that the officer informed her of the contents of the deed; that she was separately examined; that she acknowledged the execution and release to be made freely, voluntarily, and without the compulsion of her husband. When the husband and wife reside in the state, and the latter is over eighteen years of age, she may convey her lands, with formalities substantially the same as those used in a release of dower; she acknowledges the instrument to be her act and deed, and that she does not wish to retract. When she resides out of the state, if over eighteen, she may join her husband in any writing relating to lands in the state, in which case her acknowledgment is the same as if she were a feme sole. Ill. Rev. L. 135-8; 2 Hill Ab. 455, 6.

Certificate Of Acknowledgement defined: The requirement for acknowledgments on certain documents—such as deeds transferring the ownership of real property, wills giving the ownership of property to a decedent's heirs after death, or documentary evidence that is to be admitted in a legal proceeding—is established by state law. If such documents do not contain acknowledgments, they are ineffective and cannot be used in any legal proceedings.

Any or all of the parties to a document may be required to acknowledge it. Only those persons specified by law, a Notary Public, for example, may take an acknowledgment. Usually, a person making an acknowledgment does not have to explain the contents of the document to the person taking the acknowledgment. A person who ordinarily takes an acknowledgment might be disqualified from doing so if that person stands to gain some benefit from or has a financial interest in the outcome of the transaction. For example, state law requires a person making a will, a testator, to make an acknowledgment to a certain number of witnesses that the document is the genuine expression of how that person wants his or her property disposed of upon his or her death. Suppose the state requires two witnesses. If the people selected as witnesses have financial interests in the person's will, they will be disqualified for purposes of acknowledgment. This is done to deter dishonest people from fabricating a document that is beneficial to them. Such a will is legally ineffective; once the testator dies, his or her property will be transferred according to the laws of Descent and Distribution.

A certificate of acknowledgment, sometimes referred to as the acknowledgment, is evidence that the acknowledgment has been done properly. Although its contents may vary from state to state, the certificate must recite: (1) that acknowledgment before the proper officer was made by the person who completed the document; (2) the place where the acknowledgment took place; and (3) the name and authority of the officer. The certificate may be on the document itself or may be attached to it as a separate instrument. West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc.

Acknowledgment defined: n the section at the end of a document where a notary public verifies that the signer of the document states he/she actually signed it. Typical language is: "State of Texas, County of Deaf Smith: (signed and sealed) On July 1, 1994, before me, a notary public for said state, personally appeared James Fifield, personally known to me, or proved to be said person by proper proof, and acknowledged that he executed the above Deed." Then the notary signs the acknowledgment and puts on his/her seal, which is usually a rubber stamp, although some still use a metal seal. The person acknowledging that he/she signed must be ready to produce a driver's license or other proof of existence, and must sign the notary's journal. The acknowledgment is vital for any document which must be recorded by the County Recorder or Recorder of Deeds, including deeds, deeds of trust, mortgages, powers of attorney that may involve real estate, some leases and various other papers.

“Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties, and as regards a remote party other than holder in due course, the delivery, in order to be effectual, must be made either by or under the authority of the party making, drawing, accepting, or indorsing, as the case may be; and, in such case, the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument. But where the instrument is in the hands of a holder in due course, a valid delivery thereof by all parties prior to him, so as to make them liable to him, is conclusively presumed until the contrary is proved.”  

“Any false representation of material facts made with knowledge of falsity and with intent that it shall be acted on by another in entering into contract, and which is so acted upon, constitutes ‘fraud,’ and entitles party deceived to avoid contract or recover damages.” Barnsdall Refining Corn, v. Birnam Wood Oil Co., 92 F 26 817.