Contract Lawyers Minneapolis | Getting Out of Contract in Minnesota

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This is an odd article to write for a Minnesota contract lawyer who spends most of his contract law practice making sure that the terms of a contract are enforceable. Yet, occasionally, I have clients who are looking for a way to get out of a contract for many reasons. Some of these clients suddenly found themselves in a situation where compliance with the contract terms is no longer economically feasible or desirable. Others have personal reasons which make continuation of compliance with a contract non-practical and even personally disagreeable (especially in business partnerships).

Lawyer-Written versus Non-Lawyer Written Contracts

For the purposes of getting out of contract, the situations where one party suddenly wishes to attack the enforceability of a contract can be divided into two large categories. The first category involves contracts written, or rather copied from other sources (especially Internet), by the parties themselves. In this case, the contracts are usually inadequately drafted and contain many errors and omissions. Naturally, this type of contracts is much easier to attack for someone who wishes to avoid his contractual obligations.

On the other hand, the contracts in the second category are drafted by Minnesota contract attorneys. Usually, these contracts are based on the court-tested provisions, involve multiple levels of defense, constrict venues of attack, and prescribe certain procedures for disputing the enforceability of the contract. These contracts present a much more difficult target than those in the first category.

Methods for Getting Out of Contract

Irrespective of the category to which a contract belongs, Minnesota contract litigation lawyers usually utilize five broad methods for helping their clients avoid their contractual obligations.

1. Exit Provision in the Contract

First, the most simple method is to take advantage of the provisions that a contract already contains. Most of the contracts I draft for my clients contain negotiated “exit” provisions, which prescribe the procedure for either contract termination or withdrawal of a party from a contract.

This is especially true in the case of entity governance contracts such as Partnership Agreements, Member Control and Operating Agreements (for multi-member LLCs), corporate Bylaws, and so on. Also, Independent Contractor Agreements, in order to comply with law, often include a very detailed contract termination procedure. Sales contracts often utilize a “liquidated damages” clause to cap the amount of damages.

2. Validity of Contract

The second method is to attack the validity of the contract itself. Some of these attacks, such as lack of adequate consideration or the Statute of Frauds, will be based on the terms or form (i.e. oral versus written) of a contract; others, such as lack of legal capacity or the doctrine of unconscionability, will focus on the broad factual context which led to the creation of the contract. The precise method of attacking the validity of the contract should be chosen by a Minnesota contract litigation lawyer (if you live in Twin Cities, try locating a Minneapolis contract litigation attorney or St. Paul contract litigation attorney).

3. Contract Construction

The third method is to reinterpret the contract in such a way as to modify parties’ obligations. Here, the issue is the contract construction – interpretation of contractual terms based on the rules of contract construction and the facts of a specific case, including the parties’ course of dealing. If this is a contract for a sale of goods, UCC terms may determine the outcome. This method requires a very deep understanding of contract law. Therefore, only Minnesota contract litigation lawyers should be involved in implementing this strategy (again, if you live in Twin Cities, try locating a Minneapolis contract litigation attorney or St. Paul contract litigation attorney).

It should be noted that contract construction is involved to a varying degree in all of the methods described in this article. This is why it is crucial to retain a Minnesota contact lawyer as soon as possible.

4. Excuse for Non-Performance

The fourth method is to find an excuse for the non-performance of a party’s obligations under the contract. Notice the difference between the fourth and the second method – in the fourth method, the contract is assumed to be valid, but a party’s breach of this contract is discharged for some reason. Examples of this method include: doctrines of Impossibility and Frustration of Purpose, discharge by a later contract (for example: rescission, release, et cetera), change in law, and so on. It is up to your particular Minnesota contract litigation lawyer to determine which of these excuses applies and how to prove it in court.

5. Breach

Finally, the fifth method is to just breach the contract. Generally, there are two situations where a Minnesota contract lawyer may advise this course of action. First, whether the benefits of the breach of contract are likely to substantially outweigh the damages the breaching party will need to pay. Second, where the contact is breached in such a way as to significantly reduce the damages. Again, the circumstances of a particular case will determine whether this method should be utilized.

Conclusion

Getting out of contract in Minnesota is not easy. Yet, it may be possible if there is a right combination of facts and legal strategy. Once the plan of attack is established, its implementation will require skillful implementation by your contract lawyer.

Sherayzen Law Office can help you analyze your case, choose the legal strategy right for you, and vigorously and skillfully implement this strategy in negotiations as well as in court.

Call NOW to talk with an experienced contract law attorney!

Contract Litigation Lawyers Minnesota | Understanding Contract Litigation

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Contract litigation permeates the very fabric of advanced economic societies. The primary reason for this widespread presence of this type of litigation is because contracts provide the most common and basic means of conducting transactions between individuals and especially businesses. Contracts, whether written or oral, govern the everyday economic relations. Every time you buy something for a certain price at a store, you agree to a contract. Every time your business hires a worker, it enters a contract.

Since contracts can be found almost everywhere in our economic lives, it is little wonder that disputes often arise between the parties about the exact terms of what they have agreed to or what their contractual obligations are.

Contract litigation is a civilized way to settling these contract disputes. It is a process where the parties to a contract, usually represented by contract litigation attorneys, present their respective arguments to an impartial judge of the relevant jurisdiction the laws of which govern the interpretation of the contracts and even which laws apply. Usually, the parties’ arguments revolve around three common themes. First, interpretation of the contract and the parties’ rights and obligations. Second, enforcement of a party’s contractual rights or obligations. Third, obtaining remedy for whatever damage produced as a result of the other party’s breach of contract. Usually, the remedy is limited to recovering damages, but there are situations where a party will seek an order from the court to compel the other party to perform as promised (this is known as “specific performance”). In some situations, an injunction prohibiting a party from doing something may be appropriate.

A lot of people unfamiliar with contract litigation commit a common mistake of thinking that contract interpretation is limited solely to the language that can be found in the contract itself. While ambiguous, competing or contradictory clauses may form the core of a party’s argument, contract litigation lawyers usually have to also analyze the particular facts of a case which may be relevant to the interpretation of the disputed language of the contract.

Beyond these basic litigation themes, contract litigation involves a myriad of other procedural and substantive decisions: assessment by contract litigation lawyers of whether a case should be litigated, where to file the case, the laws of which jurisdiction of should apply, what evidence should be presented, who should testify, how would a judge interpret the contract given the trends in the laws of a relevant jurisdiction, and so on. Therefore, it is very important to involve a contract litigation lawyer as early as possible in the contract litigation process.

Sherayzen Law Office can guide you through this labyrinth of procedural and substantive issues and litigate the case for you. When you retain Sherayzen Law Office to represent you in a contract dispute litigation, you get a vigorous advocate of your legal position who is thorough, detail-orientated and possesses strong litigation skills, with the analytical ability to identify and achieve effective resolutions. We recognize that litigation is a means to an end and structure our litigation strategies in such a way as to protect and enforce your business interests.

Call NOW  to discuss your case with a Minnesota contract litigation lawyer!

Federal Income Tax Litigation: the Basics

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When taxpayers file their income tax returns, a determination of tax is made. The IRS must then “assess” a tax liability in order to collect the amount owed. Generally, the period for assessment is three years from the due date, or from the date the return is filed, whichever is later (see this article for more details on the IRS statute of limitations).

If the IRS questions a tax return, it may then begin the audit process. The IRS may conduct its audit at the taxpayer’s place of business (“field audit”), in IRS offices (“office audit”), or by correspondence. If the IRS agent then determines after the audit that a tax deficiency exists but the taxpayer does not agree, the revenue agent will then send the taxpayer an examination report called, “Revenue Agent’s Report” along with a letter termed a, “30-day letter”. The 30-day letter details various information and informs the taxpayer that he/she has a right to request a hearing with the IRS Appeals Division within 30 days.

At this point, the taxpayer has three options: (1) accept the IRS’ determination of the tax deficiency, (2) appeal to IRS Appeals, or (3) simply disregard the letter and wait for the next IRS notice. If the taxpayer then appeals to IRS Appeals and is unable to settle the case, or if the taxpayer simply disregards the 30-day letter, the IRS will then send a notice of deficiency letter called the, “90-day letter”.

The 90-day letter gives a taxpayer several options. He may pay the amount owed based upon the IRS determination of deficiency and pursue refund tax procedures in U.S. District Court or the Court of Federal Claims. A taxpayer may also petition to the Tax Court within 90 days (unlike pursuing refund procedures, payment of a deficiency is not required in order to litigate in Tax Court). If the taxpayer’s case involves less than $50,000 in dispute for each tax year, a taxpayer may file the case as a “small tax case” (also called, “S-case”). S-cases are advantageous for taxpayers who are arguing without legal counsel, as informal court procedures are used; however, right to appeal the case is waived. Finally, if a taxpayer does not respond to the 90-day letter at all, the tax deficiency is then assessed, and the amount owed may then be collected by the IRS if not paid within ten days. The IRS is required to give a notice and demand for payment within sixty days of assessing the deficiency.

If a taxpayer loses in Tax Court, the case may then be appealed to the Appellate Court in the Circuit the taxpayer resides when the case was filed (provided it is not an S-case). Alternatively, taxpayers who lost pursuing refund procedures in District Court may appeal to the Court of Appeals, and those who lost in the Court of Federal Claims may appeal to the Court of Appeals for the Federal Circuit. The U.S. Supreme Court will hear appeals for any of the Circuit Courts.

This is a very basic overview of Federal Income Tax Procedure and Litigation. It is important to note, that depending upon your case, it may be strategically necessary to litigate in traditional district court, as opposed to Tax Court. This will involve more formal legal procedures.

Sherayzen Law Office can help you analyze your case, choose the appropriate litigation venue for the appeal, and vigorously represent your interests before the IRS and in courts.

Call NOW to discuss this case with an experienced tax attorney!

Minnesota Business Lawyers: Applying for a Business License

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In many industries, obtaining a business license is one of the most significant prerequisites for doing business in Minnesota. Paradoxically, despite its importance, too many businesses resist involving Minnesota business lawyers in this process from the very beginning – at the stage of the business license application preparation. Instead, attorneys throughout Minnesota (including Minneapolis business attorneys and St. Paul business attorneys) are involved in the process only after the business license application is rejected by the relevant state agency.

There are two primary reasons for the late involvement of Minnesota business lawyers in the process. First, business owners believe themselves perfectly capable of filling-out a license application. Second, small businesses are always looking for a way to cut costs and think they are saving money by involving business lawyers only by the time of an administrative appeal hearing.

Both motivations are flawed. A business license application often involves much more than simply filling out the basic information and gathering the supporting materials (such as financial statements or criminal records). The key to a successful application is the ability to spot potential issues and fix the problems prior to the submission of the application to the government agency. It is true that Minnesota business owners are smart and energetic individuals perfectly capable of filling out an application. However, they often lack the necessary legal experience and training to identify potential problems and know how to fix them.

Second, it is much cheaper to involve an attorney at an early stage of the business license application process than to deal with the problems at an administrative appeal hearing. Prior to the submission of the application to the agency, the attorney should be able to review the application filled-out by the owner and all of the supporting materials, spot potential problems, and advise on how to fix these problems immediately. Even after the application is submitted and the relevant Minnesota government agency raises an objection, involving an attorney who may be able to negotiate the solution to the problem prior to the final agency determination may prove to be very cost-effective.

By the time the application is rejected, however, Minnesota business license appeal lawyers will have to deal with a prolonged process defending the business owner’s interests. Even worse, in many cases, the burden of proof may be on the initial applicant, which means, for example, that a business lawyer would have to prove that the government more likely than not committed an error of judgment (or some other legal theory).

In sum, litigation is almost always more expensive than the prophylactic measure of involving a Minnesota business license lawyer at an early stage of the business license application process. At the very latest (i.e. the last opportunity to save the application while lowering legal expenses), the business owners should involve Minnesota business lawyers at the time when they receive the first request for additional information from a relevant Minnesota government agency.

Sherayzen Law Office can help you at every stage of the business license application process, starting from the initial review of the application to dealing with the government agencies , handling the administrative appeal hearing, and litigating further appeals to the district court and higher appellate courts if necessary.

Call  to speak with an experienced Minnesota business license application lawyer!

Innocent Spouse Relief

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In general, a husband and wife are jointly and separately liable for any tax, penalty and interest owed for a year in which they have filed a joint tax return. This means that the IRS can collect the entire amount of tax owed from either spouse alone, regardless of who reported income, or who may have been responsible for errors, omissions, or fraud on a tax return. Joint and several liability thus can potentially result in a situation where substantial amounts of taxes, penalty and interest are owed by one spouse due to the errors, omissions, or fraud committed by the other spouse.

Difficulties involving joint and several liability tend to arise especially when spouses have divorced or separated, and are no longer living together after they have filed a joint tax return. A spouse who is responsible for the errors, omissions, or fraud in a tax return may have an incentive to not cooperate with the former spouse, and may be difficult to even locate. However, due to the fact that a joint return was filed, the IRS could collect the entire amount of tax, penalties, and interest owed from the spouse who was not at fault for the problematic tax return.

In order to provide a remedy for this unjust outcome, in certain circumstances, the IRS allows a spouse, who lacked knowledge of a tax understatement and did not engage in activity giving rise to the understatement, to claim “Innocent Spouse Relief” resulting in full or partial relief from the payments and penalties associated with an understatement of tax made by another spouse.

Legal Test for Innocent Spouse Relief

In order to qualify for Innocent Spouse Relief, all five of the following conditions must be met:

1. A taxpayer must have filed a joint return for a taxable year.

2. On the tax return, there was an understatement of tax attributable to “erroneous items” (see definition below) of a spouse (or former spouse).

3. A taxpayer must establish that when he/she signed the joint return he/she did not know (“actual knowledge”) and “had no reason to know”, that there was an understatement of tax.

4. Taking into account all the facts and circumstances, it would be unfair to hold the taxpayer liable for the deficiency in tax for such taxable year attributable to the tax understatement; and

5. A request for innocent spouse relief will not be granted if the IRS can prove that the taxpayer requesting Innocent Spouse Relief and the taxpayer’s spouse (or former spouse) transferred property to one another as part of a fraudulent scheme. (A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, ex-spouse, or business partner.)

Definitions

a) Erroneous Items: an “item” for the Innocent Spouse Relief purposes generally means anything that is required to be reported separately on a tax return or its attachments. There are two types of erroneous items. The first is unreported income, which is any gross income item received by a spouse (or former spouse) that is not reported. The second is an any improper deduction, credit, or property basis claimed by a spouse (or former spouse).

b) Actual Knowledge: if taxpayer requesting Innocent Spouse Relief actually knew about an
erroneous item that belongs to his/her spouse (or former spouse), then the taxpayer will not qualify for Innocent Spouse Relief, and will remain jointly liable for that part of the understatement.

c) Reason To Know: If a reasonable person in similar circumstances would have known of the
understatement, then the taxpayer will not qualify for Innocent Spouse Relief, and will remain jointly liable for that part of the understatement. The IRS will consider a number of facts and circumstances in determining whether a taxpayer had reason to know of an understatement of tax due to an erroneous item, including the taxpayer’s educational background and business experience, the financial situation of both spouses, the nature of the erroneous item and the amount of the erroneous item in relation to other items, the extent of the taxpayer’s participation in the activity that resulted in the erroneous item, whether a reasonable person would have inquired at the time the tax return was signed about the erroneous items, omitted items on the return, and whether the erroneous item represented a departure from a recurring pattern reflected in prior years’ returns.

d) Indications of Unfairness: The IRS will examine a number of factors including, whether the taxpayer’s spouse (or former spouse) deserted him/her, whether the taxpayer and his/her spouse have divorced or separated, whether the taxpayer benefitted from the understatement on the return, and whether the taxpayer received a “significant benefit” (any benefit in excess of normal support), including transfers of property or rights to property, and transfers that are received several years after the year of the understatement.

Types of Innocent Spouse Relief

There are three types of Innocent Spouse Relief available:

1. Full Relief from tax liability (including penalties and interest) for a taxable year to the extent that the liability is attributable to the tax understatement on the joint return. There are certain requirements which must be met in order to qualify.

2. Apportionment of Relief from tax liability (including penalties and interest) for a taxable year. Under this type of innocent spouse relief, the understatement of tax is apportioned between the taxpayer and his/her (or former spouse). In order to meet this type of relief, a taxpayer must show that he or she did not know, and had no reason to know, the extent of understatement on a tax return. If granted, the taxpayer will be relieved of a tax liability to the extent that such liability is attributable to the portion of the understatement that the taxpayer did not know, or did not have reason to know that was in error or omitted.

3. Equitable Relief may be granted if an individual does not meet the requirements for the first two types of relief, but, after taking all the facts and circumstances into consideration, the IRS determines it would be inequitable to hold the taxpayer liable for the unpaid tax.

How Sherayzen Law Office can Assist You

Requesting Innocent Spouse Relief may require legal expertise because of the specificity of the requirements involved, and the necessity of persuading the IRS that you qualify for this relief. Moreover, in some cases, the Tax Code regulations governing the Innocent Spouse Relief process may themselves be challenged in courts. Sherayzen Law Office can help you understand and comply with the required regulations, draft the necessary documents and represent you in your negotiations with the IRS in order to help you limit your tax liability.

Call NOW to discuss your case with an experienced tax attorney!