Do You Write Your Own Business Contracts?

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If you create your own business contracts, unless you’re experienced business lawyer, chances are you’re creating a bunch of legal risks for your company with each deal.

Because most people who don’t actively practice business don’t know how to identify all of the important issues that must be covered in a commercial agreement…and they don’t know how to write the contract’s terms and conditions in a way that’s legally binding either.

Equally important, there are some things you never put in a business contract. Not only can these items expose your company to civil liability…but they can even be a crime.

Would you perform heart surgery on yourself? Of course not.

Because the risks to your health are too great.

The same is true of being your own business lawyer. If you don’t have the knowledge and experience to do it right, the down side to getting things wrong is an unacceptable risk.

If you need help preparing or revising contracts for your company, it’s time to speak with an experienced business lawyer.

Are The Right People Signing Your Business Contracts?

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A frequent mistake I see in business agreements is that the wrong people are signing them. The consequences of this issue can be expensive.

Here’s why…

If a contract signatory doesn’t have signing authority from the entity he represents, that company may not be legally bound to perform the agreement.

Even if there is signing authority, business contract signature lines are often screwed up so that it’s unclear in what capacity the person is signing.

For instance, if Sheila Jones signs her name on behalf of her company but neither her business nor her title is identified as part of the signature, one can make a strong argument that the signature was in a personal capacity (with personal liablity!) instead of as an authorized company representative.

Then there’s the missing signatory to a business contract. There are several common variations of this type of mistake. For instance, a person might sign in one capacity but fail to sign a second time in a different capacity. Because it’s common for a person to need to sign once as an individual (e.g., personal guarantee) and a second time as an authorized signatory (eg., President) of his company that’s a party to the agreement.

Then there’s the missing spouse consent problem. This frequently occurs in the sale of a business. For example, Mary Smith signs an agreement to sell her company. However, because her husband John may have a marital interest in the business (even if he doesn’t have equity titled in his name), the company’s buyer will want the husband to sign off his consent to the sale.

If you need help with your company agreements, it’s probably time to talk with an experienced business contracts lawyer like Attorney Mike Young.

Whose Business Contract Do You Use?

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When you’re doing a deal, do you have an experienced business lawyer draft the agreement or do you work off of the other party’s agreement?

As a general rule, you get a far better deal when you start with a contract prepared by your business attorney instead of trying to fix unfavorable terms in the other side’s agreement.

And not only do you have to identify what the other party put in the agreement that could hurt your business, you’ll also want to revise the agreement to cover issues that were not addressed…assuming the other side agrees to it.

Don’t assume that “standard terms and conditions” are standard. In most cases, they’re standard only in the sense that the other party uses them all of the time and they generally favor that party (not you).

Yes, it’s easy for eyes to glaze over when reading legalese. However, if a deal is important, it should be done with the right contract to protect you and your business.

What if the other side insists on using their contract as the starting point? In some cases, you have to bite the bullet and use that. However, you can sometimes use the threat of going to their competitor to get the deal papered on your terms instead. It really depends on whether or not the other side needs to do business with you.

Regardless, start your potential deals with an assumption that your contract will be used instead of the other party’s agreement. If nothing else, you may get concessions off the bat in exchange for agreeing to use their contract during the negotiations.

Are You Commingling Multiple Businesses?

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If you own multiple limited liability companies or corporations are you commingling the businesses?

If so, you expose these ventures to unnecessary legal dangers.

For example, a court might decide one company is the alter ego of the other and hold both of them liable in a lawsuit. Instead walls of protection, you’ve let down the drawbridge and invited in plaintiffs to raid all of your companies.

So, how do you avoid this commingling danger?

Treat them as separate companies.

For instance, don’t raid the bank account of Company A to pay Company B’s expenses simply because the latter is short on cash.

And when the entities do business with each other, use written contracts that explain the rights and duties of each entity under the agreements.

For example, if Company A wants to advertise on Company B’s website, there should be an advertising agreement in place where B gets compensated somehow by A for running the ads. No freebies from one company to the other simply because you own both.

What about intellectual property? If one company owns the IP, but you want both companies to use it, chances are you’ll need some type of licensing agreement between one entity as owner (licensor) and the second entity as licensee.

An experience business lawyer can help you put the right documents in place to protect your multiple businesses from improperly commingling. And if you’ve already been commingling, he can help you fix the situation to minimize the legal risks.

How to Avoid King Charles’ Fishy Mistake in Your Business Deals

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old business contract in scroll formOnce upon a time, a Prince Charles lived in exile while the Cromwells ruled England. Having enjoyed his time in Belgium, Charles repaid the country for their help when he took the throne.

Perhaps the king had a moron for a lawyer. Or his legal counsel was too afraid to question the king’s decisions.

Because King Charles II signed an agreement in 1666 that gave Belgium the right to have 50 fishermen use English waters “for eternity.”

Let’s just say that “eternity” is not something you typically want to include in your business contracts.

Because 300 years later, the Belgian government demanded England honor the contract. And the British gave in because it was a binding agreement.

In fact, there’s a Belgian politician going on TV these days to show the agreement. He’s taunting the British with it.

Of course, you might wonder how this applies to your business.

Here’s what’s important to know…

Part of running a company (or a country for that matter) is having systems in place that serve your interests.

And one of the first places to start is to get an experienced business lawyer to prepare contracts that help you succeed.

Because even if the term isn’t for eternity, it can seem like forever if you’re stuck in a bad agreement that’s costing you time and money.

And with the holidays about to kick in, now is the perfect time to get your business set up to start 2021 on the right foot. If you need a new contract prepared or an existing agreement improved, let’s talk.