It’s your legal team’s job to make your contracts work for you and foster your business. Every business deal carries some risk — the real question is what level of risk is acceptable, and whether you want to take it. Here are the issues you and your legal team should watch most closely.
Who Are the Parties?
Pay special attention to whether affiliates are covered by the contract. If you’re working with subsidiaries or commonly owned companies, consider what the definition of “affiliates” includes — the typical definition does not include commonly-owned companies. Ensure the correct parties are listed, or you may find it difficult to enforce the contract.
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The time span of an agreement can have a major impact on the enforceability of your claims. Consider whether your agreement renews automatically, how it can be terminated, penalties for early termination, and what happens when it ends.
What Is Being Exchanged?
Is your agreement clear and concise? Have you specified the levels of performance or minimum criteria for an acceptable product? Are the conditions of performance clear? Is there a force majeure clause to protect you if a natural disaster bars performance? Would the agreement be clear to a third party outside your industry? Define all of these factors throughout the agreement.
Timing of Performance
Does the agreement specify due dates for performance, payment, updates, or key meetings? Is there a penalty for delays? Will interest apply to late payments?
What Is Included in Your Agreement?
Have you incorporated all the terms from previous discussions into the final agreement? Does it have an integration clause stating the agreement is the final expression of the terms between the parties? The parol evidence rule may prevent you from submitting evidence of previous conversations if the agreement is integrated. Note the change procedures — whether amendments must be written or signed.
Who Is Assuming the Risk?
Contracts are full of language allocating and disclaiming risk — warranties, terms and conditions, service levels, limitations on liability, and exclusion of damages. A well-written agreement removes as much liability as possible from you and limits it to acts you’re directly responsible for. Be wary of language providing for joint and several liability between you and parties you didn’t hire, such as other vendors serving the same customer.
Who Owns the Intellectual Property?
For many companies, the value of a custom-made product lies in ownership of the intellectual property rights. When negotiating, consider what is being created, whether it’s a custom design or existing product, what you intend to do with it, and whether you want sole ownership.
Who Is Bound by Confidentiality?
When discussing product development or services, it can be difficult to speak freely while preserving confidential information. Non-disclosure agreements or confidentiality clauses help preserve the integrity of that information so you can have the conversations your business needs.
How Are Disputes to Be Resolved?
Would you prefer arbitration, mediation, or escalation? Where will disputes be resolved, and which law will apply? Will attorneys’ fees be awarded to the prevailing party? Do you believe equitable remedies are warranted, rather than just damages?
Contract language can be tricky — working out the nuances requires attention to detail. Let us help you review or negotiate your contract and get your business moving.
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Frequently Asked Questions
What are the most common contract problems?
Frequent issues include unclear party definitions, missing or vague terms, one-sided liability and indemnification language, no integration clause, undefined performance timing, and unclear dispute-resolution provisions.
What is an integration clause?
It states that the written agreement is the final, complete expression of the terms between the parties. Combined with the parol evidence rule, it can prevent earlier conversations from being used to contradict the written contract.
Should I have a lawyer review my contract?
If the agreement carries meaningful money, ongoing obligations, IP, or liability exposure, yes. A review identifies the clauses that expose you before you sign — far cheaper than a dispute later.
This article is general information from Accord & Shield Legal, PLLC and is not legal advice. Reading it does not create an attorney-client relationship. For guidance on your specific situation, please consult a qualified attorney.
Frequently Asked Questions
Frequent issues include unclear party definitions, missing or vague terms, one-sided liability and indemnification language, no integration clause, undefined performance timing, and unclear dispute-resolution provisions.
It states that the written agreement is the final, complete expression of the terms between the parties. Combined with the parol evidence rule, it can prevent earlier conversations from being used to contradict the written contract.
If the agreement carries meaningful money, ongoing obligations, IP, or liability exposure, yes. A review identifies the clauses that expose you before you sign — far cheaper than a dispute later.