Leave the Contract Drafting to the Attorneys
Nowhere is the old saw “an ounce of prevention is worth a pound of cure” truer than in the realm of contract drafting. As a commercial litigator, time and again I have seen companies spend millions on litigation because they failed to take the necessary steps years earlier to ensure that their contracts were properly drafted and sufficiently clear. And almost always the reason the contracts were not sufficiently clear and detailed is because the parties thought they could save some money doing things without a lawyer. These are just some of the common pitfalls I’ve seen.
Failure to Set Forth Consideration
A promise is made, and a promise is broken, certainly the courts will enforce that promise in the event you decide to sue, right? Not so fast. Unless the contract at issue sets forth obligations flowing both ways, i.e., a “promise for a promise,” the broken promise may not be legally enforceable. This is called “consideration,” and unless both parties’ consideration is set forth in the contract, it may not be a legally binding contract.
Failure to Name the Parties
More and more business organizations involve multiple entities. Corporations, limited liability companies, a manifold of partnership types—the world of business organizations is incredibly complex. Unless a contract specifically sets forth exactly what entities have what obligations, you may find yourself with an unenforceable contract, or just as bad, a defendant that may have no assets with which to satisfy any judgment you might obtain.
Failure to Define Terms
As a litigator, ambiguity is often my friend, but in a properly drafted agreement, there should not be much ambiguity for me to work with. Nailing down what each term means makes your contracts clear and strong and prevents clever lawyers from trying to find wiggle room on undefined terms when matters break down.
Failure to Include the Boilerplate
Many a business owner has sighed looking at the lengthy document prepared by their counsel. Surely, they think, the contract did not need to be this long. But all that boilerplate at the end serves very important purposes. Items like a merger clause, which confines the parties’ agreement to the language contained within the contract, a dispute resolution clause, which sets forth how and where disputes between the parties are to be resolved, a choice of law, which sets forth the set of laws to be used in interpreting a contract, are all likely to be overlooked by a non-lawyer drafting their own agreement but are vital to the outcome of any future disputes between the parties. And, although much of it can seem to be rote or obvious, that is exactly the point—to avoid surprises later.
Failure to Consider the Contract from a Non-Party’s Point of View
The drafters of an agreement have often discussed the subject of the agreement at length and may have understandings about the agreement that do not ultimately make it into the language of the agreement. This can be a fatal error. Having someone who was not part of these discussions actually put pen to paper is helpful because those individuals will seek to describe the agreement in its entirety, making every aspect of the agreement explicit.
Failure to Consider the Worst Case
Experienced counsel will have seen all the ways contracts can eventually “go wrong” and will endeavor to create a contract that puts you in the best possible position in the event the parties end up in a dispute. Most parties think things will always be smooth sailing, that everyone will live up to their obligations, and that present conditions will simply continue. However, being well positioned in the event things do not go well is important. Experienced counsel will set terms so that when a dispute arises you are well-positioned in that dispute.
Whenever you or your business find yourself negotiating a contract of importance, it is key to hire experienced counsel who can recognize the subtleties that can lead to unintended consequences down the road. Dressel/Malikschmitt LLP is a sophisticated firm with the skills necessary to both avoid unfortunate surprises in your agreements, as well as to negotiate the most favorable terms possible for you and your business. Whether you are seeking counsel for a “one off” contract or to engage an outside general counsel on a regular basis, please contact us through our online form, or by calling us at (848) 202-9323.