Tag: business contracts

Business legal services in Silicon Valley

Top 5 Business Contracts Mistakes

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Contracts and contract reviews are part of everyday life for Bay Area businesses.  However, many business owners and managers make mistakes when creating, considering or approving a business contract that can have catastrophic ramifications on your business.  Here are five common mistakes in business contracts and how to avoid them.

1.   Using Internet or Ready-Made Contract Forms

There are several reasons a ready-made contract form will not work for you and your business. They include:

  • Contracts must be relevant in your locality. A form contract from Michigan may not contain clauses that are standard in California contracts.
  • State laws are varied. The law could be different from where and when the contract was originally drafted. You must review borrowed language from such a contract for amendments to relevant state law, including additions and subtractions to the various codes at play in the agreement.
  • Contracts are drafted from the perspective of one side over the other; is the form contract you are reviewing beneficial or detrimental to your deal?
  • Contracts for one type of entity may not be relevant for other types of entities

2.   Seeking Legal Advice After Signing the Contract

Even if your deal is relying on a generic contract template you pulled from the Internet, have a business contract lawyer review it before you sign it to make sure it protects you and includes all of the terms it should and does not put your business at risk.

3.   Forgetting the Recitals

A recital, in legal terms, is a preamble to the contract. It provides a general idea to the reader about who the parties are, what the contract is about, and why the parties are signing the contract. Often overlooked during the contract drafting and negotiation phases, when a dispute arises over contractual interpretation, the court or arbitrator may use the recitals as an aid to interpretation of the contract. Focus on the operative provisions of the commercial contract, but do not forget to set the scene and provide the reader of the contract with background information.

4.   Not Knowing Which Clauses to Include and Which to Leave Out

Not understanding boilerplate (standard contract clauses) can come back to bite you when a dispute arises. A business lawyer provides advice as to which clauses should be included in your contract and which clauses should not.

For example, an assignment clause should be included in a commercial contract. An assignment clause will permit you to assign the contract to another entity (someone who buys your business). Without an assignment clause, the contract may not be sold or transferred should you sell your business after the commercial contract is signed.

Another issue that can be addressed by a business attorney is whether a contract should include an arbitration clause.  The arbitration clause must also contain information about the impact of any decision by an arbitrator.  With no or weak arbitration clause included, the statement may be advisory and not enforceable.

5.   Forgetting That Words Have Meaning

Form contracts are notorious for containing vague and ambiguous language. Using words without clear definitions is dangerous to contracting parties because it places the interpretation of such language in the hands of someone else. Ambiguities are normally construed against the drafter of the contract. It is possible then that ambiguous language will have at least three interpretations – yours, the other party’s, and the court or arbitrator’s. A court or arbitrator may be bound to interpret such a clause using the custom and practice of your locality, which can be different from the custom and practice of your industry and even your intent at contract formation.

Ask Us to Review Your Business Contract

Make sure that your commercial contract is in writing and reviewed by an experienced and knowledgeable business contract attorney who can provide you with actionable advice and counsel to protect your business.

Avoid these and other common business contracts mistakes. Contact us now about reviewing your commercial contract before you sign it. We represent and counsel clients in Fremont, CA and the surrounding communities of Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, Gilroy, San Jose, and Santa Clara, CA.

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Business legal services in Silicon Valley

A Legal Expert Should Be Reviewing Your Businesses Documents and Agreements

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Here’s Four Really Good Reasons

Many businesses don’t often hire independent counsel to review their business documents. The documents in question can range from a simple sales contract between your company and a new client, to a commercial space lease for a new location, to a complex asset sale agreement to sell or purchase an asset, product, or business.

It’s quite easy and natural for the Owner, Principal, or President of the company to review and sign-off on any contract that crosses his desk. Who better than the Owner, Principal, or President is most versed in the business and its products, markets, and services?

The Owner, Principal, or President of the business along with the business unit seeking the contractual relationship is most certainly the expert on the subject of the deal. The internal review is just one aspect of the review process for a legal document. When the document in question is a legal document or agreement, a legal expert should be brought in by the business to offer a legal perspective. It is critical for a legal professional to take a look before the document is signed and presented to the other party for approval.

Here are four really good reasons why in your next review of a business agreement you should strongly seek a legal expert to help you legally interpret and analyze the document:

1.    The cost of skipping an attorney review of your business agreements could put you out of business in comparison to what it costs to have someone review the documents and analyze the deal before signing the agreement.

2.    An attorney review of your business agreements can offer a fresh legal perspective and provide you with advice of current customs and practices in your industry relating to contracts.

3.    You are not an expert at contract interpretation or the law if a dispute arises. A lawyer is able to provide clients with interpretation and analysis of the law in your jurisdiction to the facts of your contract and/or potential dispute. No other professional is able to do that. Especially if a mistake was made during the contract formation or execution process, a lawyer can help your business solve the problem and defend your company in court when a deal goes sideways.

4.    A business lawyer is also your legal representative. During the drafting and negotiation of the contract, a business lawyer can stand in your place, negotiate with the other party’s counsel, and provide you with actionable intelligence on points in your agreement where you can influence or change terms to protect your business and receive a favorable outcome.

If you are a business in Fremont, Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, Gilroy, San Jose, and Santa Clara, California, seek the legal advice and counsel of a business lawyer.  The Law office of Lynnette Ariathurai is ready to help.

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Serving Businesses and Start Ups in the Greater Bay Area including Fremont, Hayward, Union City, Castro Valley, Milpitas, and Newark, CA.

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. Contacting us does not create an attorney-client relationship.