Beyond the more technical advice we provide our clients on their various business and intellectual property needs, we also counsel them to beware of “contract killers” that often lurk beneath the surface of a deal. These “contract killers” can range from entire provisions to one-word expressions. Examples include:
- Bad choice of law and forum. What law applies? And, if you sue or get sued, where does a lawsuit have to occur? Businesses often skip these questions as being “the legal stuff.” But the answers can create serious problems for a business and might even prove lethal to a company’s ability to sue for breach of contract or to mount a reasonable defense to a claim for breach or wrongdoing.
If your business is in the state of Georgia, but you’re having to prosecute or defend a case in Washington state, how easy is that going to be for your business to afford—especially if the other party is in Washington state. Working with your attorney on more neutral-choice law and forum options can make a big difference on whether your business has control over the deal post-closing.
- Omitting critical stakeholders in negotiations. Do you have the right people involved in negotiations to ensure the contract, as signed, is right for your business? Getting the right people involved is critical to ensuring efficient negotiations and drafting a contract that’s a good fit for your business in terms of its priorities and capabilities. You don’t want to be the business that has to go back after signing to request changes that should have been caught during negotiations. These types of changes are typically expensive—if the other side will even agree to them.
- Ignoring the renewal. Does your business need or want the contract to renew? Businesses often forget about whether a renewal period is right, and if so, under what conditions. Keep your antenna up for these clauses and whether they make sense for your business now and/or after a period of years.
- Missing the provisos. Does each clause in a contract actually do what it is supposed to do and, perhaps more importantly, what you think it does? Provisos can pop-up to restrict or even undermine hard-won terms and conditions. They are used to signal carve-outs, exceptions, loopholes, and sometimes complete about-faces on what you may think has been agreed.
Look out for words like “the foregoing notwithstanding,” “provided, however,” and other such phrases. They’re not always wrong, and they are frequently necessary. But they can often slip through unnoticed and may only be poorly understood until they are applied to a given situation, when fixing it is most difficult. When you see these phrases, call them out and insist they be rendered in simple and straightforward English that makes their consequences obvious.
All types of business entities (and their executive teams) must be on guard against contract killers and language that simply does not match up with the company’s true mission. This seemingly general problem can cause actual damages for thriving businesses.
The team at Baker Jenner LLLP is focused on marrying your contracts with your company’s long-term goals and building walls to protect vulnerabilities. Call us at (404) 400-5955 for professional, precise counsel for your dynamic business.
Baker Jenner LLLP
