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Chapter 6
Contracts
LEARNING OBJECTIVES
Explain what a contract is and the elements thereof.Discuss independent contractors, as they apply to contract law.Describe how a hospital can be liable for the acts of a physician based on the concept of contract law.Explain the possible defenses and remedies for nonperformance of a contract.Describe under what circumstances an employee handbook could be considered a contract and how to avoid that assumption.Contract
A special agreement, written or oral, that involves legally binding obligations between two or more parties.Purpose of a Contract
To specify, limit, & define agreements that are legally enforceable.A contract forces the participants to be specific in their understandings & expectations of each other.Contracts serve to minimize misunderstanding & offer a means for parties of a contract to resolve disputes that may arise.Types of Contracts – I
ExpressOralWrittenImpliedVoidableElements of a Contract – I
OfferConsiderationAdequacyElements of a Contract – Acceptance
Meeting of the MindsDefinite & CompleteDurationComplete and ConformingBreach of Contract
Occurs when there is a violation of one or more of the terms of the contract.Elements necessary to establish a breacha valid contract was executed.plaintiff performed as specified in the contract.defendant failed to perform as specified in the contract.plaintiff suffered economic loss as a result of defendant’s breach of contract.Competent Parties
CorporationsPartnershipsAgentsIndependent ContractorsLegality of Object
To be a valid contract, the contract must not violate any federal or state statute, law, rule or regulation.Conditions
Act/s or event/s that must occur or be performed by one party before the 2nd party has any responsibility to perform under the contract.Performance
Substantial performance by one party to a contract will obligate the other parties to perform.Nonperformance Defenses – I
FraudMistakesMistake of FactMistake of LawDuressIllegal ContractImpossibilityStatute of LimitationsRemedies
Specified PerformanceMonetary DamagesGeneral & Consequential DamagesDuty to Mitigate DamagesEmployment Contracts
Express AgreementImplied ContractsText Cases: Employment Contracts
Nurse Breaches Contract:Repayment of Tuition RequiredNo Express Agreement: Right to TerminateRestrictive Covenant EnforceableRestrictive Covenant Not EnforceableEmployee Handbooks – I
Elements necessary to establish employee handbook as a contract:policy statement that clearly sets forth a promise the employee can construe to be an offerpolicy statement must be distributed to the employee, making him or her aware of the offerafter learning about the offer & policy statement, the employee must “begin” or “continue” to workEmployee Handbooks – II
Hospital Violates Provisions of Employee HandbookHandbook Not a Contract Due to DisclaimerTermination of Contract Due to InsubordinationMedical Staff Bylaws a Contract
Applicants for appointment to a medical-dental staff submit a signed application attesting he has read & agree to accept & abide by the bylaws.The physician promises to abide by the medical staff bylaws in exchange for medical staff privileges.Exchange of promises, constitutes consideration to support any contract of this bilateral nature.Exclusive Contracts
An organization often enters into an exclusive contract with physicians or medical groups for the purpose of providing a specific service to the organization.Exclusive contracts generally occur within the organization’s ancillary service departments (e.g., radiology, anesthesiology, and pathology).Noncompetitive Contract Clauses
Often included in employment agreements.Agreement not to practice within agreed upon geographic area.Legal counsel should be sought prior to executing such agreements.Transfer Agreements – I
Identification of parties to agreementPurpose of agreementPolicies & procedures for transferOrganizational responsibilities for transferExchanging/Sharing informationTransfer Agreement – II
Retention of autonomyProcedure for settling disputesProcedure for modification or terminationSharing of ServicesPublicityExclusive v. Non-exclusive agreementInsurance Contracts
Form of risk management used primarily to hedge against risk of potential loss.Insurer obligation to indemnify insured for losses caused by specified events.Insured pays fixed premiumReview Questions – I
What is a contract?
Describe differences between express & implied contract.
What are the elements of a contract?
Discuss remedies available for nonperformance of a contract.
Discuss importance of disclaimers in employee handbooks.
Review Questions – II
6. Discuss why courts often consider medical staff bylaws a contract.
7. Explain why exclusive contracts are so controversial.
8. What is an insurance contract?
 
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