Does Your Business Lawyer Draft Contracts That Encourage Dispute Resolution Or Lawsuits?

By | Business Contracts, Dallas Business Lawyer, Intellectual Property | No Comments

Does Your Business Lawyer Draft Contracts That Encourage Dispute Resolution Or LawsuitsImagine your most important business agreement has been breached by the other side. What would you do?

For many companies, the answer is a costly lawsuit that often sucks up more time and money than the amount of damages caused by the breach in the first place.

Is there an alternative to a breach of contract lawsuit?

Yes.

Have your agreements drafted an experienced business lawyer so that they favor resolving disputes quickly and at minimal cost.

How?

Here are three key issues to cover in your business contracts that should fix most problems:

(1) Include a comprehensive alternative dispute resolution process;

(2) Make the law that governs the agreement favorable to you; and

(3) Have disputes settled in a location that minimizes your costs.

Related Article: 5 Things You Should Review With Your Business Lawyer Annually

1. Alternative Dispute Resolution Clauses

5 Things You Should Review With Your Business Lawyer AnnuallyYour agreements should provide for a multi-step process for solving problems without going to court.

Common stages of dispute resolution include informal discussions between the parties, mediation, and arbitration (binding or non-binding). Many business attorneys who are not trial lawyers prefer binding arbitration for their clients because it typically saves time and is cost-effective.

2. Applicable Law

Make sure that the law governing your agreement generally favors you. This is particularly important when the other party is located in another country whose laws on contract enforcement are lax or nonexistent.

3. Venue

Even if you’re not heading to court, you’ll want the location of your dispute resolution process to be in a location that’s convenient for you. Ideally, that will mean having the contract provide that mediation and arbitration occur in the same geographic area (e.g. city or county) as your company’s headquarters. In the alternative, if the other party insists, agree in the contract to resolve disputes at a neutral location that’s mutually convenient.

What contract disputes should your business lawyer encourage be resolved by a court instead?

Unfortunately, sometimes it’s necessary to sue to protect your company’s legal rights. Because of this, your corporate legal counsel will want to carve out exceptions to mandatory alternative dispute resolution to cover issues like intellectual property infringement, violation of a non-competition clause, and related matters where equitable relief from a court may be needed.

Don’t Treat Your Employees Like Strippers

By | Business Contracts, Employment Agreements, Independent Contractor Agreements, Taxes | No Comments

employees independent contractorsAs reported by Jessica Anderson in the Baltimore Sun (Strip club dancers are suing clubs over pay – and winning), strip clubs are getting in trouble by improperly treating strippers as independent contractors instead of as employees.

Although there’s no hard and fast rule as to whether an individual working for your company is an employee or an independent contractor, the U.S. Internal Revenue Service (IRS) does provide some guidance on the issue.

Important Employment Factors

Two key factors that favor employment status are setting the work schedule and controlling how the work must be done by the person. For strip clubs, this meant club management telling the dancers when they had to perform and dictating what they could and couldn’t do when stripping/dancing.

What’s the potential damage by mislabeling employees?

If you treat your employees as independent contractors, you may be liable for back wages, statutory damages, penalties, employment taxes, plus contributions to workers compensation and unemployment compensation funds. These misclassified employees may also be eligible for benefits you’ve provided to your other workers, such as 401k contributions, paid vacation, and health insurance.

How to this problem?

If your workers are really employees, treat them as such from the time you extend an offer to work for you. Pretending they’re independent contractors when they’re not creates a ticking time bomb of legal and tax liabilities you don’t want.

On the other hand, if a worker truly is an independent contractor, it’s often a good idea to make that relationship clear in a professionally prepared written independent contractor agreement signed by the parties. If the contractor decides to assert employment status, you’ve got a contract to point to when trying to convince a judge or government agency that the worker is not an employee.

IRS Form SS-8

If it’s truly unclear whether your workers are employees or independent contractors after consulting with an experienced business lawyer, you may wish to file a Form SS-8 “Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding” (PDF file) with the IRS for a determination as to the workers’ status.

Sale of Business Leads to Expensive Breach of Contract Lawsuit

By | Business Contracts, Business Lawyer, Business Legal Alerts, Buy Internet Business, Buy/Sell Internet Business, Sell Internet Business | No Comments

As reported in The Connecticut Law Tribune, “Oral Surgeon Wins $3.1M in Breach of Contract Suit.” Although you can read the details of the particular lawsuit in Karen Ali’s article, note the important lesson from this case. The terms and conditions of an agreement to buy or sell a business must be followed, including post-closing obligations each party owes the other.

When picking a business partner, be at least as careful in performing due diligence as you would when selecting a potential spouse for marriage. The monetary stakes are often higher in the business arrangement.

Also make sure that you have a signed professionally prepared buy-sell agreement so that if one party decides to leave, you’ve already put in place a road map to be followed that preserves business continuity and ideally does not adversely affect the relationship between the parties upon separation.

How to Terminate a Contract Early

By | Business Contracts, Business Lawyer, Consulting Agreements, eCommerce Agreements, Employment Agreements, Independent Contractor Agreements, Licensing Agreements, Technology Contracts, Texas Business Lawyer | No Comments

terminate a contract earlyAlthough parties often benefit by having an annual or multi-year contract that either renews automatically or gives one party the option to renew, there are many cases where an ongoing relationship is not financially beneficial.

Whether it’s poor performance, market changes, or some other adverse event, you may want to terminate a contract early.

Contract Terms and Conditions

According to Texas Business Lawyer Mike Young, the first thing to do is review the terms and conditions of your agreement, including any amendments, to determine if there is a clear path to premature termination. “Many contracts provide for early termination by giving advance written notice, particularly when one party is in material breach and fails to timely fix the problem after being notified of the violation,” he said.

Some agreements provide for termination without cause and with little or no notice if the party who ends the contract pays an early termination fee to the other party.

Negotiated Termination

If one party to an agreement is unhappy, the other party frequently is dissatisfied too. If it appears the differences are too great, and the contract is silent on early termination, you may wish to reach out and make an offer to end the deal early anyway. Frequently both sides will agree to this and go their separate ways without a termination fee being paid by either.

Just as it was important to get your contract down on paper in the first place, it’s equally important to ensure that your agreement to terminate early is in writing signed by the parties.

Why? Because memories fade faster than ink.

If there’s a subsequent disagreement about how the relationship ended, you want to be able to rely upon written terms to show exactly what was agreed to and what was not.

Decide Not to Renew

If a contract contains renewal provisions, such clauses frequently permit either party to provide notice of intent not to renew at the end of the current term. Although this is not technically early termination, it does prevent the contractual relationship from continuing longer than the minimum time required.

Be sure to follow instructions to the letter as to the method and deadlines for giving proper notice.

Terminate a Contract Early by Efficient Economic Breach

If it is essential to terminate your agreement early, you’re able to compensate the other party for such termination, and you’ll financially benefit after paying such compensation, it may make sense to walk away from the contract even if the other party wants to continue the relationship.

Be sure to discuss this option with an experienced business lawyer before taking any action because there are a variety of legal factors that must be taken into account when evaluating the true cost of a willful breach of contract.

Non-Disparagement

Regardless of the method you choose to terminate a contract early, it’s important not to publicly disparage each other as the relationship ends.

In addition to creating ill will and tarnishing your company’s reputation, disparaging the other party can lead to additional claims for damages in a civil lawsuit and increase the likelihood you’ll end up in court rather than walking away from the original deal amicably.

5 Things You Should Review For 2017 With Your Business Lawyer Now

By | Business Contracts, Business Lawyer, eCommerce and Technology, Federal Trade Commission, Internet Lawyer | No Comments

business lawyer reviewTo make sure your company is heading into the new year with minimal legal headaches, it’s time for an annual checkup with your business lawyer. If you hate lawsuits and government investigations, here are five things you should cover during your consultation.

1. Changes in Business Ownership.

It’s important to verify who owns equity in your company and decide if changes in ownership need to be made for tax or other purposes.

Frequently, a key player joins or leave a business but the legal paperwork gets overlooked to reflect changes in ownership. In addition, the marriage or divorce of an equity owner may result changes in ownership.

As time passes, it may also make sense to plan to transfer some or all of your equity to your children as they assume responsibilities at your company.

These are just a few scenarios. The important thing is to recognize that ownership frequently changes hands in a company and you want to do it correctly to ensure that the business is protected and taxes are minimized.

2. Entity Status.

If you’re operating your business as a sole proprietorship or a general partnership, it’s probably time to discuss with your business lawyer the advantages of converting your company into either a corporation or a limited liability company.

Your legal counsel can explain the pros and cons of each type of legal entity so that you can make an informed decision as to the best path for protecting yourself as the company grows during the coming year and beyond.

3. Existing Contracts.

Have your business lawyer review your existing contracts to ensure you’re protected and to spot potential legal dangers that can be prevented by taking action now rather than procrastinating.

Sometimes this may mean amending an existing agreement, replacing it with a new agreement that better reflects the deal between the parties, or simply taking certain steps (e.g. giving required advance written notice) to extend or terminate a contract.

4. New Agreements.

During your consultation with your business attorney, be sure to discuss new relationships with employees, independent contractors, suppliers, and joint venture partners.

It’s likely you’ll have a few of those relationships that you’ll need to paper over with legal agreements to ensure that you’re adequately protected in case things go wrong, to reduce the risk of misunderstandings with the other parties, and to avoid lawsuits in general.

5. Business Lawyer Review of Website Compliance.

Because the laws and regulations governing ecommerce are constantly changing, make sure your attorney reviews your website for compliance issues. According to Internet Business Lawyer Mike Young, it may just involve a simple update to your site’s privacy policy and other legal docs.

Occasionally, you may also need to tweak some of the language on your site to avoid getting in trouble with the U.S. Federal Trade Commission (FTC) or other government regulatory agency.

Note that this list of five issues is not all-inclusive. However, it does cover the most common legal problems that you’ll want to get fixed during an annual checkup with your business lawyer.