Business contracts play an important role for every business. But all too often small businesses use a contract that was downloaded from the internet or copied from some other source. These second-hand contracts are often unsuitable for the specific needs of the business and can be unenforceable and cause harm. Is your business using a second-hand contract downloaded from the internet or from some other source? Or has a third-party presented your business with a contract for signature with terms you’re uncertain about? Speak with a contract review lawyer! This blog post highlights some of the benefits of using a contract review lawyer to review your business contracts.
Fits Your Business Needs
One important benefit of hiring a contract review lawyer to review your business contract is to ensure that the contract is tailored for your business needs and situation. Contracts are not signed in a vacuum but should reflect business reality and fit the business situation. Before reviewing a business contract, a good contract review lawyer will want to know the answers to the following questions:
- Who are the parties to the contract?
- What is the purpose of the contract?
- What are the agreed upon terms?
- What are the parties to the contract supposed to be doing and when?
- Are there any issues with the contract that you as a business are concerned about?
- What do you as a business want to happen if the other party fails to fulfill their promises?
Once armed with this information, the contract review lawyer will critically examine the business contract to make sure that it fits your expectations and point out any issues. You would be surprised at how often a second-hand contract misses the mark.
One common problem is that the business contract specifies the wrong choice of law or forum for a lawsuit. This has unwelcome consequences when the contract needs to be enforced. Imagine being forced to go to California to enforce a contract for non-payment when you’re a Massachusetts business! A good contract review lawyer will point out any issues like this so that they can be corrected before the contract is signed.
Clarity and Understanding
Another benefit of having a contract lawyer review your business contract is to improve the clarity of the contract about what each party is agreeing to do. At the most basic level, every contract involves a mutual legally enforceable agreement between two or more parties whereby the parties are promising to take (or not take) certain actions. This means, that every contract should, at a bare minimum, clearly and unambiguously state the following information:
- Who are the parties making the contract?
- What is each party promising to do or not do?
- When is each party required to fulfill its obligations?
- Where is each party required to fulfill its obligations?
These questions should be definitely and clearly answered in the contract before the contract is signed and before any party is supposed to start fulfilling its obligations. Nothing critical should be left unstated and there should be no mystery about what any party is promising to do and when. You would be surprised about how many contracts fail to clearly answer these questions and create confusion and misunderstandings among the parties.
A good contract review lawyer will make sure that the answers to the questions are clearly contained in the contract and fit the business situation where the contract is being formed. If the answers are not clear from the face of the contract, your business runs the risk of disputes about what each party is supposed to do. This often results in unwanted hardships and can lead to litigation among the parties and a waste of time and money.
Identify Legal Risks
A further benefit to having a contract review lawyer look at your business contract is to identify and help you address the legal risks associated with the contract and proposed transaction. Every business situation and contract has some legal risks associated with it. These risks can include to non-performance by the other party, infringing on intellectual property, failing to include key legal clauses, assuming unnecessary risks, missing compliance or regulatory requirements, and others.
Some legal risks can’t be avoided, but using second-hand contracts magnifies the risks. All too often small businesses use a contract or are asked by a third-party to sign a contract that requires them to voluntarily assume unnecessary legal risks. A good contract review lawyer possesses the expertise to scrutinize every aspect of the contract and the business situation to assess its compliance with relevant laws and regulations. By identifying potential risks, a contract review lawyer can propose necessary revisions or additions to protect your interests, negotiate better terms and minimize the potential for future liabilities and obligations.
Perhaps the most important benefit to having a contract lawyer review your business contract is to prepare for the worst. Small business owners must understand what happens under the contract if something goes wrong and there is a dispute about any party’s performance.
Nobody wants this to occur but your business needs to be prepared! If the contract is silent about the issue, the default mechanism for resolving any dispute is a lawsuit filed in court, although the exact location of the appropriate court will be unclear. It could be the location of either party or some other forum depending on the transaction and contract.
Business contracts, however, can alter this default mechanism in any number of ways. The contract can call for good faith negotiation before filing any lawsuit or require mediation and/or arbitration. It can also call for certain types of disputes to be filed in a specific court, typically an injunction, specify the law that will be applied, and many other possible requirements.
These details matter when a dispute occurs and a good contract review lawyer can identify how your business contract specifies that disputes will be handled. This is especially important when your business wants to enforce your business contract. I have advised numerous businesses who are unable to enforce their business contract because the dispute resolution provisions in the contract are impracticable or not cost-effective. Don’t let this be your business!
Contract Review Lawyer Next Steps
Don’t get stuck working with a business contract that does not protect your business. Bross Law, LLC can review and advise you about any of the following business contracts:
- Business Customer Contracts
- Non-Disclosure/Non-Solicitation/Non-Competition Agreements
- Business Sale and purchase Agreements
- Commercial Property Lease Agreements
- Shareholder Agreements
- Limited Liability Company Operating Agreement
- And Many others