You’re Damned if You Don’t Have Your Lawyer Review Your Business Contracts

Posted: July 26, 2011 in Choosing a Lawyer, Noncompetes

If you sign a contract for your business without understanding all of the terms, you could expose your business to serious damages.

No one likes to pay legal fees, I get that, but don’t be penny wise and pound foolish.

All that legalese and boilerplate has meaning. Yes, it can be tedious and boring to read and amend the provisions, but it must be done. Many business people mistakenly believe that contracts are standard, boilerplate, that the terms aren’t enforceable, etc. Many think that the legal terms of contracts aren’t negotiable, so why bother. That’s a defeatist, head in the sand attitude that will only lead to trouble.

Red flag terms that you absolutely need a lawyer to review include the following: indemnification, hold harmless, choice of law, arbitration, continuation or renewal provisions, cancellation provisions, limitation of damages provisions, liquidated damages provisions, noncompetes, non solicitation provisions, legal fees provisions. Personal guaranties, etc.

A quick test will determine whether you need a lawyer’s review. Ask yourself, do you understand all of the terms? Do you know what your exposure is? A good lawyer is like contract insurance. You might pay $1,000 for a lawyer to review, revise and negotiate a contract (it could be more, it could be less), but you could save yourself tens or hundreds of thousands in liability.

I can’t tell you how many times I’ve had a business client come to me after the business dealings went awry, and their either being sued, or they are looking to sue because of the other party’s wrongdoing. When I examine the contract, I see numerous unfavorable or poorly drafted provisions that easily could have been addressed before signing. But (insert clichés about barn doors and horses, trains leaving stations, and ships sailing).

If you’re a Massachusetts business faced with a vendor or other contract with some of the above terms, or if even if your own contract needs a tune up, give me a call at 617.338.7000. I’ll look at it and give you a quote on cost before charging you a dime (assuming there is no conflict of interest).

By Adam P. Whitney

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