California Prosecutors Win Unfair Competition Suit Against Candymaker

Previously on our blog, we explained the nature of unfair competition lawsuits, and also gave examples of recent cases involving unfair competition claims. One of the cases we mentioned has reached a resolution, and the final judgment shows how steep unfair competition penalties can be.

District attorneys in Yolo, Sacramento and San Joaquin counties successfully sued Pennsylvania-based R.M. Palmer Co., the candy company behind “Too Tall Bunny,” a chocolate bunny marketed as “too tall” for the box it is in. The company began marketing the chocolate bunny, whose ears appear to poke out of the top of the box, about three years ago. According to the prosecutors, the product’s packaging is “untrue and misleading,” because the bunny not really “too tall” for the box. The candy bunny sits on a cardboard platform that raises its stature, and makes its size deceptive.

The candy maker and prosecutors reached a deal, but to make sure it was enforced the district attorneys filed a lawsuit in Yolo County Superior Court. The deal was attached to the lawsuit which was confirmed by the Yolo County Superior Court.  A judge issued a final judgment the same day the suit was filed, agreeing that the packaging was misleading and in violation of laws prohibiting unfair competition and false advertising.

In Pursuant to the agreement, R.M. Palmer agreed to cease discontinue marketing the product. The company and will pay a civil penalty of $2,500 for each act of false or misleading advertising. It will also reimburse the county prosecutors for their costs associated with trying the case.  The total amount that R.M. Palmer will pay under the A total court judgment of ($46,919) will be paid over two years.

Unfair competition actions usually begin with consumer complaints, which are pursued to protect consumers from false and misleading marketing schemes. They are also pursued to make sure there is a level playing field for all businesses. The fines associated with a violation will depend on the seriousness of the misconduct, the number of violations, and the length and willfulness of the misconduct. The idea behind issuing penalties is that they will remove the financial incentive for deceptive business practices and deter businesses from violating unfair competition and false advertising laws.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, commercial and real property claims. Contact us at (310) 277-7747 to see how we can help you.

What is a Change Order in a Construction Contract?

“No prudent individual would make a contract for the construction of a building of any magnitude without incorporating a provision somewhere making specific and definite arrangements concerning extra work.” City Street Improvement Company v. Kroh, 158 Cal. 308, 321 (1910).

Previously on our blog, we discussed how changes to construction contracts are often unavoidable, but that there are limitations to how much a construction contract can change. In this article, we will discuss the proper tool for acceptable change requests: the “change order.”

A change order is essentially an amendment to a construction contract. It represents the mutual consensus between the parties on a change to the schedule, price, work, or other contract term.  Like any other contract amendment, a change order has to meet the requirements of valid contract formation (offer, acceptance, reasonable identification of changed terms, exchange of consideration, and be signed by both parties).

A change order should always be accompanied by documentation, such as original contract documents, emails discussing the change, revised plans and specifications, meeting minutes, and any other reports that might be related to the change order.  Change orders and associated documents should be kept on file with all other project records.  Moreover, since the statute of limitations for most construction claims is ten years, every contract, change order, and supporting document for a change order should be kept at least that long. Finally, it is especially important to determine and document the cost of a change order.

If you have questions about construction contract claims, consult an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, real estate, construction and property claims. Contact us at (310) 277-7747 to see how we can help you with your business, real estate or construction law needs.

What is Incorporation by Reference in a Contract?

Previously on our blog, we discussed how more complex contracts allude to other existing contracts and documents. Incorporation by reference is the method of making these alluded-to documents part of a contract, and is often used to save space when parties want to include or reference another legal document or contract into a new contract. To properly incorporate another document by reference, it has to be adequately described in a new contract, and it is good practice also to attach a copy of the referenced document to the new contract to which it is being incorporated.

The concept of incorporation by reference is similar to that of flow-down contract clauses in construction contracts.  For example, a flow-down clause is used to bind subcontractors to the general contractor in the same fashion as the general contractor is bound under its contract with the property owner. In the same vein, subcontracts usually incorporate general contracts by reference.

When drafting an incorporation by reference clause, parties have the option to incorporate certain provisions of an existing legal document, or the entire document. If the parties make it clear that only certain provisions are to be incorporated, the incorporation by reference clause should be explicitly clear in its limited scope and purpose. However, if the incorporation clause is very general, this could lead to potential disputes about which provisions to a contract were incorporated. To avoid any confusion, parties should specify exactly which terms are being incorporated.

Any time existing legal documents are incorporated by reference, there is a potential for conflicting terms. It is therefore important that all provisions are reviewed for conflicts, and a contract provision dictating how conflicting terms will be resolved should also be included.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, real estate, construction and property claims. Contact us at (310) 277-7747 to see how we can help you with your business, real estate or construction law needs.

Obtaining a Variance to a Zoning Restriction

In order to build a development, home, or addition that does not comply with local zoning ordinances or restrictions, a property owner or developer must obtain a variance. The exact process of obtaining a variance will vary based on applicable city or county laws, and can vary depending on the scope of the project and the type of variance sought.

For example, there could be different processes or requirements for “residential use” variances versus “residential area” variances.  Generally speaking, there are two types of variances: an “area variance” and a “use variance.” An area variance can be requested by a property owner or developer who is seeking an exception to a regulation dealing with land configuration or physical structure improvements.  A use variance, on the other hand, seeks an exception to the type of use of land permitted by a zoning ordinance or restriction.

Similarly, the process or requirements for residential variances differ as compared to variances for agricultural, industrial, recreational, or commercial property.  Once you have determined the type of variance you will need, the next step will be to contact the local city or county government office that handles development in the area where the property is located.  The local government office will usually have an application that must be completed, and typically require copies of relevant site plans, floor plans, and elevation drawings, as well as the payment of any fees associated with application submission.  Once complete, a city board will review your application and may require public hearings on the application.  If the variance request is denied, there is generally an appeals process.

If you have questions about obtaining a variance, consult an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, real estate, construction and property claims. Contact us at (310) 277-7747 to see how we can help you with your business, real estate or construction law needs.

What is a Flow-Down Clause in a Contract?

A flow-down clause (also referred to as a pass-through or conduit clause) is usually found in a construction contract and provides that subcontractors will be bound to the general contractor in the same fashion as the general contractor is bound under its contract with the property owner.

Flow-down provisions are important to protect parties to a construction contract by spelling out that a subcontractor’s obligations to the general contractor are identical to the ones a contractor has to the property owner. The specific obligations that “flow-down” generally involve the scope of work to be performed, and often also the timelines in which the work will be completed.

Flow-down clauses may also include terms about dispute resolution and payment. For example, a flow-down payment clause may state that a subcontractor will be paid by the general contractor when the general contractor is paid by the owner. Likewise, if an owner has agreed to resolve disputes with the general contractor through arbitration, a subcontractor may be required to resolve disputes through arbitration as well.

It is in an owner’s interest to have a subcontractor bound by the same obligations and requirements as the general contractor.  Subcontractors, on the other hand, commonly dispute or try to limit the scope of responsibility attributed to them through a flow-down clause, particularly when the subcontractor has limited involvement in a project. It is therefore especially important for contractors and subcontractors to look for a flow-down clause, and understand the full scope of the agreement they are signing. If a flow-down clause is particularly broad and a subcontractor cannot determine which contractual obligations will actually flow down, the clause may be found unenforceable.

If you have any questions about contract terms, consult with an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with your real estate, business, or contract law needs.

What is a B Corporation?

A “B” Corporation is an unofficial designation for socially responsible businesses.  It can also be referred to as a B Corp, Benefit Corp, or B Corp Certification. The 501(c)3 nonprofit, B Lab, determines and designates B Corporations. There are over 1,000 Certified B Corps in more than 60 industries.  Companies that have obtained B Corp designation include Etsy, Method, Seventh Generation, Ben & Jerry’s, and Patagonia.

There are many benefits associated with B Corporation status. Designation as a B Corporation can make your business more attractive to the growing number of socially conscious consumers, and consumers generally who already largely align their purchases with their values. Also, some companies offer discounted products and services to B Corp Certified businesses. For example, Intuit offers B Corporations QuickBooks for free.

In order to obtain B Corporation designation, a business has to pass rigorous standards of environmental and social performance, as well as committing to fostering open communication and transparency.  The first step is completing a “B Impact Assessment.”  A passing score on this assessment is 80 out of 200 points. The assessment examines the overall impact  a company has on its stakeholders, and will vary depending on the company’s size, sector, and location. Afterwards, a company will have to submit supporting documentation and complete a disclosure questionnaire.  Additionally, every year, ten percent of Certified B Corporations are randomly selected for an on-site review.  The purpose of these random audits is to verify the accuracy of all affirmative responses in the company’s B Impact Assessment.

Once a business has met all of these requirements,  it will be able to sign the B Corp Declaration of Interdependence and Term Sheet, making its status as a B Corp official.

If you have any questions about having your business designated as a B Corporation, consult with an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business and property claims. Contact us at (310) 277-7747 to see how we can help you with your real estate, business, or contract law needs.

How to Modify a Contract

Varying circumstances may require parties to a contract to modify their original agreement.  For example, contract modification may be necessary if parties want to extend a contract, change its duration, alter the quantity of goods to be sold or delivered, change a delivery time or place, or change a payment amount or type.

Parties typically can modify a contract at any time, as long as all the parties agree to the changes.  Minor changes in a contract can often be handwritten into the original document, and then signed or initialed by the parties. For example, a purchase order may be modified to provide for additional items and initialed and signed by the seller and buyer evidencing an agreement to the modification.

Major changes to a contract will often have to be re-negotiated and added to the agreement as an addendum.  Oftentimes, a well drafted contract will outline terms explaining how a modification may be effected. Typical terms include that the contract may only be modified in a writing that is signed and executed by all parties. Valid contract modifications will be enforced and are binding on the parties.

It is always best to ensure that all contract terms are accurate before the agreement is signed. Sometimes, modifying a contract after it has been signed can be complicated or impractical, particularly if one or both parties have already begun performing their contractual duties.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and  businesses. We have successfully prosecuted and defended various types of business, contract, and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law needs.

Misrepresentation in a Contract

If a party was dishonest about a material fact during the drafting process of a contract, the other party may be able to take the contract to court and argue that it should be rescinded, or cancelled, due to misrepresentation.  Moreover, if the honest party performed the contract because he, she, or it justifiably relied on the misrepresentation in a contract of material fact, he, she, or it may be able to collect damages if a court finds that the non-breaching party was damaged by the misrepresentation, or that the misrepresentation was intentional.

Misrepresentation in a contract circumstance occurs when a party to a contract makes a representation, using either words or conduct that communicates a false or misleading understanding, thereby inducing another party to sign a contract.  For example, if a seller of goods makes false statements or promises about the quality or nature of a product to get a consumer to agree to purchase it, that could constitute misrepresentation.

There are different types of misrepresentation in a contract, including fraudulent misrepresentation and negligent misrepresentation.

Fraudulent misrepresentation may be found where a knowingly false representation was made with the intent to deceive.  As mentioned earlier, if an individual justifiably relies on an intentionally made fraudulent misrepresentation and is harmed as a result of this reliance, they may recover damages to be compensated for their harm, which may include punitive damages.

Negligent misrepresentation occurs when a representation is made carelessly. Damages are generally available for negligent misrepresentation, however punitive damages will not be awarded in a negligent misrepresentation case.   Additionally, in the event that misrepresentation can be proven, rescission may be granted, which would release the parties from their contractual obligations.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, contract, and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law needs.

California Shareholder Rights

“Economic” Shareholder Rights

Shareholders invest in corporations primarily for economic gain or profit.  The two main ways shareholders can profit from a corporation are by receiving distributions of the company’s profits and by selling all or part of their interest in the corporation. These correspond with the two main “economic” shareholder rights: the right to receive dividends and the right to sell shares. Notably, shareholders only have the right to receive dividends as they are declared by the corporation’s board of directors, and directors are not obligated to declare dividends.  In addition, some investments and receipt of shares may come with limitations on transferability of the shares.

Shareholder Voting Rights

A company’s board of directors has the right to manage the company’s business. However, shareholders have the right to vote on important matters relating to the business, which gives them some control over the corporation as well. Most importantly, shareholders have the right to elect directors.

Shareholder Inspection Rights

Under California Corporations Code Section 1601, shareholders also have right to inspect the corporate documents, such as the incorporation record, accounting books, and meeting minutes.

Derivative Actions and Shareholder Rights

Derivative actions are brought by a shareholder on behalf of a corporation. Officers, directors, and majority shareholders owe a corporation a fiduciary duty. Someone who owes a fiduciary duty and who breaches that duty can be held liable to the corporation for damages.  Thus, in a derivative action a shareholder seeks judicial enforcement of, and redress for breach of, management’s fiduciary duties to the corporation and its shareholders by means of derivative litigation.

Involuntary Dissolution of the Corporation

Under California law, one-half of the directors or one-third of company shareholders can sue for involuntary dissolution of a corporation. A corporate dissolution may consist of a court approved liquidation or sale of corporate assets. However, the involuntary dissolution of a corporation may be avoided if at least 50% of its shareholders elect to purchase, for cash, the shares owned by the shareholders initiating the dissolution proceeding.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business and property claims. Contact us at (310) 277-7747 to see how we can help you with your business needs, or visit our Shareholder Rights page for more information.

What is an Adhesion Contract?

An adhesion contract is also referred to as a contract of adhesion or a standard form contract.  Often times this type of contractual agreement is drafted by one party, and usually looks like a template contract used in all agreements with that party. Adhesion contracts are commonly used for car purchases, cell phone and cable contracts, insurance matters, rental agreements, mortgages, and deeds.

In an adhesion contract, the drafting party is usually a business (typically a large business) with a much stronger bargaining position. The other party, usually the purchaser or consumer, does not have a role in drafting the contract and is simply presented with a “take-it-or-leave-it” offer without the ability to negotiate or modify the contract terms.

Because of the mismatched drafting power that is a part of an adhesion contract, courts will carefully scrutinize the terms of challenged adhesion contracts. A court can invalidate provisions in an adhesion contract if it finds evidence of unequal bargaining power, unfairness, and unconscionability, all to the detriment of the challenging party.

In determining whether there was unequal bargaining power, unfairness, and unconscionability, a court will examine the nature of what the signing party was agreeing to, the possibility of unfair surprise, and whether there was a lack of notice. The “doctrine of reasonable expectations” is one way for an adhesion contract challenger to justify invalidating an entire adhesion contract, or certain terms thereon. Under this doctrine, the weaker party will not be held to contract terms that are beyond what the party would have “reasonably expected” from the contract.

For example, a cell phone company forcing all customers who use its services to attend arbitration sessions in Detroit would likely not be “reasonably expected” by consumers in Southern California.  A court will not, however, free a party from an obligation to perform contract terms just because they did not read or understand a contract.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, contract, and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law needs.