WHEN WAS THE LAST TIME YOUR CONTRACTS WERE REVIEWED?
Partnership Agreement? Rental Lease? Subcontract? Client or Sales Contract? Employment Agreement?
When was the last time any of these contracts relating to your business were reviewed or updated? We use contract forms in our businesses daily. However, the law governing these contracts is always evolving. Businesses need to evolve and to change to keep pace, and the documents and practices we utilize daily are the best defense against disputes that can lead to litigation and/or government intrusion disruptive to any small business. There are a number of important provisions that every contract should have, but still many small businesses rely on outdated and incomplete contracts in their daily operations.
When it comes to contracts, a small amount of effort on the front end can save your business thousands of dollars and countless headaches on the back end when (inevitable) disputes arise.
This post identifies a few important provisions that are applicable to nearly all contracts, whether used by solo entrepreneurs, small businesses, or large companies. Do your contracts address these issues? Reach out to Gordon & Simmons now to review your company’s contracts and be better protected in the event of future disputes.
Attorneys’ Fees Provision:
Unlike other countries, in the United States, the general rule is that parties in litigation bear their own legal fees and expenses. One important exception to that rule is where a contract contains a “fee-shifting” provision and the parties to a contract agree on who will pay the legal expense if a dispute arises. For example, an attorneys’ fees provision in a contract can require the losing party to a dispute pay for the prevailing party’s attorneys’ fees and costs (this way, if you end up in court and prevail, the losing party will be responsible for their own fees and costs as well as yours). An attorneys’ fees provision can also require the breaching party to pay the fees and costs of the party that sought to uphold the contract (so if a client fails to pay an invoice, an attorneys’ fees provision can permit your company to also collect the fees and costs incurred with respect to collection).
The costs of litigation are a major deterrent to taking disputes to court, so a properly drafted attorneys’ fee provision in the contract can help a business in two ways – it can deter a party to a contract from breaching the agreement in the first instance and, if a dispute does find its way to a courthouse, it can minimize the cost to a business to enforce its contract rights by making the losing party pay for your legal expenses. Make sure the contracts utilized by your business include sufficient attorneys’ fees provisions to protect your company.
Forum Selection Clause:
Do you do business in more than one county? More than one state? If a dispute arises with a client who lives in another county or state, you may be required to travel to that jurisdiction to litigate (regardless of where your business is headquartered or operates). A forum selection provision can solve this dilemma and designate where and in what court parties to a contract will be required to litigate. While litigation is by its very nature disruptive, the challenge is greater if a business is forced to defend its interests far from where it operates. By identifying a forum of your choosing in the contract, your business can litigate in a more convenient location, avoid the chaos of finding local counsel, and focus on the merits of the dispute.
Has a client ever ignored its contract with your business and instead tried to hold your business liable for statements made in a conversation? Have weeks or months of negotiating with a client left you feeling uncertain as to what was agreed upon? A key way to protect your business from these problems is to add an integration clause to your contracts. An integration clause simply requires that anything agreed upon be specified in the written agreement. Such a clause prevents side statements from altering the terms of an agreement and can also require any later modifications to an agreement to be in writing and signed by all parties involved. With an integration clause, your business will not be liable for any conceivable promises made by your business in conversations, emails, etc. – it will only be held liable for the promises detailed in the written agreements/contracts.
The instant Small Business Blog is not intended to create any fiduciary, confidential, or attorney-client relationship between Gordon & Simmons and the reader/user. Should you wish to obtain legal advice and/or legal representation from Gordon & Simmons, please contact our firm immediately to set up a free consultation. A signed retainer agreement between Gordon & Simmons and the client is necessary for any attorney-client relationship to exist.