Business Contract Signatures – 4 Costly Mistakes To Avoid

By | Business Contracts, Business Lawyer | No Comments

business contract signaturesThe bigger the transaction, the more important it is to make sure your business contract signatures are proper.

Here are three common costly mistakes companies make with their business agreements.

  • The wrong person signs the contract
  • A person signs the agreement in the wrong capacity
  • One or more key signatures are missing

Wrong Signatory

In order to get a deal, often you’ll see someone sign business contracts who shouldn’t be doing so either on behalf of your company or the other party.

Related Article: Business Contracts – 5 Mistakes To Avoid As An Entrepreneur

B2B Business Contract Signatures

In business-to-business (B2B) agreements, this error frequently happens when a signatory lacks signing authority to bind the party on whose behalf the signature is made. For example, the signatory is a low level employee who cannot bind the company or is a corporate executive who has not been authorized by the employer to do a unique major transaction outside the ordinary course of business (e.g. a high-dollar asset sale or purchase).

B2C Business Agreements

In business-to-consumer (B2C) contracts, it’s a common for a company to erroneously permit a minor sign an agreement instead of having it signed on the minor’s behalf by a custodial parent or legal guardian.

Wrong Capacity

Poorly drafted agreements will often contain signature lines that have signatories sign in the wrong capacity. Two common variations of this mistake occur:

(1) the person signs in their individual capacity instead of on behalf of the business entity they represent; and

(2) the person signs on behalf of a company when the intent was to have impose individual liability on the signatory instead of using the entity as a shield.

Related Article: Business Contracts – Why You Should Avoid Email Deals

Missing Business Contract Signatures

Invariably when there’s a wrong signatory to an agreement (e.g. because of lack of signing authority), there’s also a missing signature that should have been on the contract.

In B2B deals, one of the most common missing signature errors involves having a person sign in more than one capacity. For example, if an entrepreneur is signing an agreement on behalf of a startup limited liability company (LLC) or Subchapter S corporation, you may want the entrepreneur to sign the agreement a second time in the owner’s individual capacity to impose personal liability that encourages performance.

Related Article: 5 B2B Contract Signature Mistakes That Can Bankrupt You

In B2C transactions, perhaps the most common error is to have one spouse sign an agreement as a consumer in situations where the signatures are both spouses’ signatures are needed for the contract to be binding and/or encourage performance because of the risk to marital estate assets if there is a material breach by the consumers.

Need Help With Your Business Agreements?

If you have existing agreement templates you routinely use at your company but are concerned about their signature lines or other potential legal issues, set up a phone consultation with Business Contracts Lawyer Mike Young to discuss what you need and get legal advice.

And if you need a new agreement prepared – either for a unique transaction or as a template to use repeatedly in your business – Attorney Young can prepare that for you too. Be sure to check out our Business Contract Legal Protection Package.

7 Things You Must Include In A Texas Gym Membership Contract

By | Business Contracts, Business Lawyer | No Comments

texas gym membership contractIf your business sells a Texas gym membership contract (this also includes martial arts and self-defense training), it’s likely you’ll have to comply with the requirements of the state’s Health Spa Act (Tex. Occ. Code § 702.001 et seq.).

In addition to registration of your gym with the State of Texas and satisfying security requirements (e.g. posting a surety bond or qualifying for an exemption), there are certain provisions that must be included in your gym membership agreements.

Why?

Why The Texas Health Spa Act Exists

Traditional gyms (a.k.a. fitness centers), martial arts dojos (e.g. Karate, BJJ, etc.), MMA instructional facilities, and self-defense training studios (e.g. Krav Maga) have a  history of taking advantage of customers through deceptive language in their contracts covering monthly billing, automatic renewals, and cancellation policies. In addition, gyms frequently go out of business, particularly those owned and operated by a single owner). The Health Spa Act is a consumer protection law designed to minimize the risks to the customer while enabling the gym owner to run a fair business with minimal government interference.

Texas Gym Membership Contract Requirements

Texas Gym Membership Contract RequirementsHere are some of the key requirements of a Texas gym membership contract under the Act.

1. The contract must be in writing and signed by the purchaser.

2. It must include the state registration number (or state-provided location ID number if the business has more than one gym location).

3. The agreement’s term cannot exceed 3 to 5 years (the maximum length is determined by whether or not membership is financed through a retail installment contract).

4. The contract must include statutory language that governs cancellations and refunds under certain circumstances, including a 3 business day right to cancel after signing, permanent closure of the gym, death or total permanent disability of the member.

5. If the health spa has not opened yet when the gym memberships are pre-sold, the agreement must include statutory language about the member’s rights if the gym doesn’t open or closes within 30 days.

6. If the gym membership contract includes a finance charge within the meaning of the federal Truth in Lending Act (15 U.S.C. § 1601 et seq.) or Regulation Z (12 C.F.R. pt. 226), the Health Spa Act contains language that must be included regarding the member’s claims and defenses.

7. Upon request by a prospective member, the gym owner must provide a comprehensive list of the membership plans available for sale.

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

Texas Health Spa Act Penalties

What are the potential penalties of a Texas fitness center for failing to comply with the Act?

  • The gym membership contract is void.
  • If the agreement involves a false, misleading, or deceptive act or practice, the gym owner may be civilly liable to the member under the Texas Deceptive Trade Practices Act.
  • State registration of the gym may be revoked.
  • The Texas Attorney General may investigate and sue the gym owner.
  • Civil penalties can include actual damages, equitable relief, punitive damages, attorney fees, and court costs.
  • In addition to civil remedies, a person who knowingly violates the Act may be guilty of a criminal offense (Class A misdemeanor).

Although these are the fundamentals of complying with the Act if you’re a Texas gym owner, there are other requirements that must be followed under the statute. That’s in addition to your other gym contracts (e.g. Texas employment contract).

If you’re unsure whether you’re following the law, it makes sense to discuss it with an experienced Texas business contracts lawyer. To speak with Attorney Young, set up a phone consultation using our firm’s online booking system or call 214-546-4247.

How To Grow Your Startup With Online Licensing Of Offline Brands

By | Business Contracts, Business Lawyer, Internet Lawyer | No Comments

online licensing brandsAs of October 1, 2017, Starbucks Corporation (SBUX) retrenched its brand by shutting down its online products store in order to drive customers to the company’s coffee shops instead. This type of brick-and-mortar focus by some retailers and wholesalers creates online licensing opportunities for entrepreneurs looking to rapidly grow their startups using others’ brands.

Getting Started With Online Licensing

If your startup is technically savvy and is proficient in direct response Internet marketing, research brands that complement your business model but lack a viable online presence. Rank these brands on what they can potentially do for your startup. Factors to consider include the expected return on your investment (ROI) of time, energy, and money.
Approach the owners of the top brands on your ranked list and express an interest in licensing their brand for the sale of products and/or services online.

Of course, not every brand owner will be interested in doing a deal. However, there will be some willing to discuss online licensing.

Putting Together The Online Licensing Deal

Among the business contracts and other legal documents that will paper the deal is the license between the brand owner as licensor and your startup as licensee.

Related Article: 7 Keys To Picking The Right Internet Lawyer For Your Business

Three important issues to address are:

  • Initial term and any renewal options;
  • Royalty payments; and
  • Scope of license (including any limitations and exclusions).

Plan For The Future In Your Current License

Smart licensees leave themselves an option to continue working in the same market as the brand owner after termination of the license. For example, you may want to form an online licensing deal with the brand owner’s competitor or even start your own competing brand for products and/or services to sell.

Related Article: Protect Your Brand With The Right License Agreement

If you want to have this option, the legal documents for the initial licensing deal must leave open the door for you to do so. For example, if the deal with the brand owner includes a covenant not to compete with the brand owner online for a period of two years after the license terminates, that will significantly impede your ability to license a competing brand or start your own.

Of course, if your startup’s investment in the original deal can be readily transferred to a product or service that does not compete with your licensor, having the option to compete post license termination becomes less important.

Need help putting together an online licensing agreement? Set up a telephone consultation with Internet Business Lawyer Mike Young today.

Business Alliance With Your Competitor: When Does It Make Sense?

By | Business Contracts, Business Lawyer | No Comments

business allianceAn AI Business Alliance

Amazon and Microsoft have announced that their personal digital assistants Alexa and Cortana will be able to communicate with each other in the near future. On its face, this type of business alliance seems counter-intuitive between technology competitors who each want their AI-driven voice systems to grab larger market share.

Why Microsoft and Amazon Are Cooperating

However, the deal makes sense today where it wouldn’t have just a couple years ago.

Why?

Neither Microsoft nor Amazon were successful in cracking the smartphone market. As a practical matter, Apple’s Siri and Google Now are the two dominant players in the mobile phone personal digital assistant arena with Samsung’s Bixby struggling for adoption outside of South Korea.

Although the tentacles of intelligent personal assistants spread into many areas, Microsoft’s Cortana is primarily focused on its business software. In contrast, Amazon’s Alexa is a driving force in consumer electronics, particularly so-called “smart homes.”

This means the competition between the two companies’ digital assistants is minimal and it benefits both of them because it adds value for their customers.

In other words, your competition can become your ally when it’s mutually beneficial to do so.

Related Article: How To Use Business Contracts To Prevent A Single Point Of Failure

How To Structure The Business Alliance

Your deal should be properly documented with a professionally prepared agreement that does the following:

  • Defines the scope of the alliance, including each party’s deliverables;
  • Specifically excludes aspects you do not want to be part of the deal;
  • Identifies the parties’ respective rights to intellectual property (e.g. ownership and licensing) and other assets involved;
  • Apportions any income and expenses;
  • States the duration of the alliance, including any renewal and early termination provisions; and
  • Provides a dispute resolution process if there’s a disagreement.

An experienced business lawyer can paper your alliance with the right legal documents so that you get what you want from the transaction.

Do You Make This Starbucks Mistake In Your Business Agreements?

By | Business Contracts, Business Lawyer | No Comments

business agreementsAre your business agreements really protecting your interests? Here’s a cautionary tale to learn from.

Starbucks wanted to distribute its coffee in grocery stores. Because Kraft already had the distribution network in place for its food, Starbucks signed a contract to have Kraft handle its coffee too.

What was Starbucks’ mistake?

Since the contract was designed to last forever, Starbucks had to pay Kraft almost $3 billion to walk away from the deal.

Related Article – B2B Contracts – How To Avoid 4 Common Mistakes

Times change, people change, and so do your business needs. Plan accordingly.

That’s why the business agreements our firm prepares are designed to protect clients now and give them options in the future when circumstances change. To learn more, check out our Business Contract Legal Protection Package.