As an attorney, it is never a surprise when I find things missing from a business contract. Even if you work in an industry where most contracts are “standard” or “boilerplate” they should always be reviewed and (almost always) modified to suit the specific circumstances of each business transaction.
There are three areas commonly overlooked (or intentionally omitted) in business contracts. Check your documents to be certain these are included.
Venue and Law
In the event of a dispute, where the dispute will be adjudicated is critical. If you are dealing with a client across the country and this section is omitted, they could file a lawsuit in their location. This would force you to incur significant fees to travel to that venue to respond. You would be at a significant disadvantage.
If you add this provision, you select the venue. This could tilt the playing field in your favor.
At minimum, you should select a mutually agreeable location, equally inconvenient to both parties.
There is also something else to think about: The applicable law. Just because you select a specific venue does not guarantee that jurisdiction’s law will be applied. You must specify the specific law you want to be applicable to enforce the terms of your contract.
Legal Fee Responsibility
Litigation is not designed to be easy or inexpensive. When you enter into a contract, you should give careful thought to the costs of enforcement of your rights. If you prevail in a lawsuit, you should be compensated for expenses required to do so.
If this is not included in the contract, a business with an in-house attorney, or a business owned by an attorney, has little financial risk in filing a lawsuit or breaching a contract.It’s a big red flag to me when a business’s in-house lawyer refuses to agree to an attorneys’ fee provision. That means that they want to avoid consequences should they choose to breach.
Protection for Your Intellectual Property
Most business owners do not think about the value of their intellectual property. Your business methods, trade secrets, marketing copy, standard operating procedures, all have value. You should take steps to protect them.
When you enter into an agreement with a service provider, he/she will have access to all of these assets. You must contractually require all service providers to protect your intellectual property. If they intentionally (or carelessly) expose them to your competitors, it could damage your business.
The fact these provisions are overlooked in many contracts can work in your favor. If the other side has drafted the contract and omitted them, you can usually add them with a bias toward your interest, without much resistance.
The best approach is to have your attorney review all your contracts before you sign them. The worst time to find out if something important is missing is when you have a problem.
If you’d like my team and me to review your contracts we have a special process set up to do this. We call it our “Business Risk Review” and it is designed to uncover any deficiencies in your documents. Once uncovered, we can reach out to the other party and attempt to correct your documents (or address them when the current term expires).
Don’t give up your rights due to an oversight. Address this issue today.