Always use a written contract!

Always use a written contract!  Why, and how do I get one?       

Why:

A written contract will help limit your business’s risks with the services or goods it is purchasing.

Scenario:

Your business has been receiving consulting services from a professional acquaintance of one of the business’s owners.  Due to the relationship between the consultant and the owner, they have been operating on a ‘handshake’ agreement.  Recently, however, the business owner has learned that the consultant may be using the deliverables it produced for your company as part of its broader consulting services offering.  Examples of deliverables may range from a custom-developed software application to a unique social media marketing program for existing customers.  Deliverables can also include tangible items, such as custom flooring, or particular types of communications equipment.  What should your business have done differently to protect itself?

Perspective:

A written contract will help your business – and the party providing services to it – establish who owns the deliverable and on what terms.  The agreement will also help both parties confirm how the deliverables can be used, protect the confidentiality of information shared between the parties as well as addressing any other key points that are required for this agreement.    

How do you prepare a contract:

Ask your existing attorney! She can either: prepare the agreement for you, or put you in touch with an attorney that can do this for you.

How can you make the discussion(s) with your attorney most efficient:

Have all of your key business terms prepared.  This means writing out the deal points your business wants to obtain (or protect) in your agreement with the 3rd party.  The business terms’ starting point will be quite helpful to share with your attorney for her drafting. 

What’s the next step with the attorney:

Once you present your business terms with your attorney, she will then review those with you.  This review is important and is one of the key reasons why there exists privileged communications between attorneys and their clients – to encourage full and frank discussion and disclosure of all the ‘warts’ that may exist with a deal.  This review will most likely also include questions for you.  Those questions may take the form of “have you thought about this?,” or “have you thought about that?” or some other approach, but they are designed to ensure you and your attorney have a clear understanding of exactly ‘what’ needs to be included in the contract. 

The discussion should also address the risks associated with the business deal.  The risks may be clear to both parties, but if not, or if there seems to be any question, please make sure that you/your business and your attorney conclude the conversation on the same page.  This should mean all risks are clearly identified and you have an agreement on how to address those risks while also, and importantly, addressing the key business points in your contact.

Now you have a draft contract, what do you do with it:

Once you have approved your attorney’s draft, then the contract is ready to be sent to the other side for their review.  That side will hopefully review and they may have some questions or suggested edits.  If you have questions about any of their edits, please discuss those with your attorney.  Your attorney will help you work to finalize terms.

Everyone has approved the final terms, now what:

Both sides sign the agreement!  Then, hopefully, this is the last time you see the agreement because both sides do what they are supposed to do.  However, if the other side fails to act, or does something else that isn’t consistent with the contract, you will have this written agreement as the starting point for: i) compelling them to perform, and/or ii) going to court and seeking to have the court assist in protecting your rights under the agreement.

I strongly encourage you to have written contract for all of your business’s agreements!  If you are wondering what contracts your business should have in place, give me a call.  I am happy to discuss your particular business needs.

RHTIII

LAWYERLY DISCLAIMER: none of the foregoing items from the list should be deemed exhaustive, nor should this post be construed as legal advice.