Business Contract Review – Know What You Are Signing Before Signing

When you bring us a contract to review, we are doing much more than simply reading the document. When reviewing any legal document, we are actually carefully analyzing the language of the document and evaluating several different things:

  • Does this contract accurately describe the deal the client believes they have made?
  • Is the legal document fair to the client?
  • What happens if there is a disagreement in the future?
  • In what ways does this document limit the client’s rights?
  • Is the contract clear?
  • How would a court interpret this document?

When we review a contract we are giving you a legal opinion about what the legal consequences of signing the document will be. The purpose of a contract review is to make sure your interests are protected and that you are not being taken advantage of. Because contracts are designed to be legally enforceable agreements, it is important to look at a contract from a legal perspective as well as a business perspective.

Having a qualified business lawyer conduct a contract review is one of the best ways businesses can avoid signing legally binding agreements that they later regret.

Our contract review services provide you with valuable information about what the effects of the agreement will be. It goes far beyond simply reading through the different clauses. We explain to you how a court would view each clause and why that may matter to you if the business relationship encounters problems later on.

Why Have a Lawyer Review Your Contracts and Legal Documents?

Because contracts are legal documents they are often filled with legal jargon, confusing phrases, and dense paragraphs. When a lawyer reviews a contract they are able to interpret it for you.

Through years of training and experience, attorneys have come to not only understand what all the terminology in a contract means, but how it will affect you and your business. A lawyer can help you see possible traps in a contract that you never realized were there.

When a lawyer conducts a review of your business contracts and legal documents they will help you understand:

  • The terms of the contract that go beyond the deal
  • What the legal jargon or “terms of art” really mean
  • Areas where the contract is confusing or ambiguous

The difference between reading a contract yourself and having a contract lawyer conduct a review of the contract is like the difference between river rafting without an experienced guide and taking the same trip with a guide. The guide can help keep you safe and dry. If you try and make the trip without a guide by the time you realize the danger, it may be too late.

Contracts Are About More Than the Deal

Typically, businesses enter into contracts as a way to memorialize a deal. Some deals are more complicated than others. But, a contract is often about much more than the negotiated deal. A contract often has clauses that will govern all the aspects of the commercial relationship between the two sides.

The contract may deal with issues such as:

  • What is the interest rate on late payments?
  • What is the protocol for damaged shipments?
  • Can the rights under the contract be sold?
  • When the agreement can be canceled?
  • What happens in the event of a natural disaster?
  • How can the agreement be amended?
  • How long is the agreement going to be in force?
  • What happens if there is a breach of contract?
  • How are damages calculated?
  • Are disputes subject to mandatory arbitration?
  • Where can lawsuits be filed?

All of these issues may touch on the deal the two parties are striking, but the contract is concerned about the legal consequences of everything that could happen during the course of the two sides trying to fulfill the contract.

Often small business owners haven’t even considered these possibilities because they are focused on getting the deal done and getting back to business. A small business attorney can help your business avoid a contract that gives the other side too much leverage.

Typically, contracts are not perfectly fair. The way the contract is written will usually favor the side that drafted the contract. When you have an experienced small business attorney, that understands how the terms of the contract could impact your business, looking over your legal documents before you sign them, you are able to avoid future business litigation problems and to push back against terms that make the contract too one-sided.

If you have never had an attorney review contracts and legal documents related to your business, we highly recommend having a legal audit done. The primary purpose of a legal audit is to assess your business’s legal risk exposure. The main way this assessment is accomplished is by reviewing all the contracts and agreements your business has entered into. The results of the audit may show that your business is on a strong legal footing. Or, it may reveal legal and financial risk exposure far greater than you may have previously thought.

Understanding Terms of Art

For most people, the worst part of a contract is all of the legal jargon. However, this legal jargon can serve an important purpose. There are many phrases that have specific legal meanings and consequences that may be different from the way the words or phrases are used in normal conversations.

Lawyers call these phrases “terms of art”.

These terms of art often determine how a court will decide what a contract means. Unless you have had specific experience with a given term of art, it can be difficult to understand their consequences. Sometimes, it can even be difficult to know that a particular phrase means something completely different in the context of the contract than the way the phrase might ordinarily be used.

As your business lawyer we will interpret these phrases and explain their consequences during the course of a contract review. When businesses end up in contract disputes it is often because one side did not fully understand what the contract entailed. The legal jargon or terms of art are usually at the heart of the confusion.

Having a contract fully vetted by an Orlando contract lawyer will help you fully understand your company’s rights and duties under the agreement so that you are able to enter into the agreement with your eyes wide open.

Is the Contract Clear?

One of the most dangerous issues a contract can have is ambiguity. Contracts are designed to be legally enforceable agreements. This works well when the terms and clauses of a contract clear and well drafted.

But, when anything of the terms are confusing or ambiguous, it makes disputes much more likely. Ambiguous terms may lead the two sides to have widely divergent versions of what each other’s duties and responsibilities are under the contract. Contract disputes not only get in the way of the two sides doing business together, but they often lead to expensive litigation.

However, it is during litigation that poorly worded contracts can cause the most trouble. If the terms of the contract are clear, it is easier to predict the outcome of the litigation. This makes cases easier to settle.

But, when the terms are unclear it may make it difficult to predict how the court will interpret the language of the contract. Just like in business, in the law uncertainty is expensive.

Poorly worded contracts can even cause a court to rule that there was never an enforceable agreement of any kind between the two sides because of the confusing and ambiguous wording of the legal documents.

A contract lawyer will easily be able to spot poorly drafted clauses. They can suggest changes and improve the clarity of the contract. This will help prevent misunderstandings and disputes, save you money on future litigation costs, and let you spend your time running your business instead of sorting out contract issues.

What Happens If There is a Dispute?

When lawyers are reviewing and drafting contracts they are always focused on what would happen if there were some type of contract dispute. Contracts are written to give businesses greater predictability in their commercial dealings.

That predictability comes from understanding how the legal system would ultimately deal with a contract dispute. Businesses often approach contracts like a young couple in love approaches marriage. Businesses are not focused on what happens if one side breaches the contract, they are just excited to get the deal done. They are confident this deal will be great for both sides.

However, often the most important clauses of the contract deal with the worst-case scenarios. The best contracts make the costs of a breach of contract clear. When a contract lawyer conducts a legal document review they are looking to see if there any clauses that state:

  • Who pays legal costs in the event of a dispute?
  • Is there a mandatory arbitration clause?
  • How will damages be calculated?
  • Are there any liquidated damages?
  • Does the contract specify a particular state or location where lawsuits must be filed?

If you did not draft the contract you may surprised to find out that if something goes wrong down the road, the contract may require you to file a lawsuit in some faraway location, instead of here in Florida. The contract could even restrict your right to even bring a lawsuit. Instead, you may have to deal with a private arbitrator, that you did not get to choose, as a result of an overlooked Alternative Dispute Resolution clause.

Because attorneys are not invested financially or emotionally in the deal, they are able to give you a fact-based assessment of what could happen should there be a dispute later on in the relationship.

The last thing you want is to be surprised by how limited your rights are after you have already signed the contract.

What Do You Do After a Contract Review?

When we conduct a contract review, we will do more than just give you a list of information about the deal. We will also give you some recommendations.

We will go through the contract with you and highlight any terms or clauses that:

  • Put you at a disadvantage
  • Are unclear
  • Restrict your rights
  • Could cause you problems in the event of a dispute

After you understand the legal consequences of the contract as currently drafted we will likely suggest one of the following course of actions:

  • Sign the deal as written
  • Ask the other side for minor modifications
  • Request major changes to the contract
  • Draft a new contract and send it to the other side
  • Renegotiate the entire deal

The exact recommendation will depend on the terms of the contract, your situation, and the nature of the underlying deal. While having us review your legal documents will give you powerful insights into the nature of the contract and the possible consequences of signing it, it is the actions you take as a result of the review that matter most.

We will give you legal advice, but it is up to you to either accept the deal or to request changes. Sometimes businesses, especially small businesses, are afraid to ask for changes in the contract because they worry that they will lose the deal. However, many businesses expect there to be some back and forth over the terms of a contract. That is part of doing your due diligence.

Once we have reviewed the contract and provided our recommendations, if you feel uncomfortable negotiating new and / or better terms you can always have us negotiate for you. When you are really close to a deal negotiating terms that protect you and your business can be challenging. We aren’t attached to the deal, we’re at the negotiation table to protect you, your interests and reduce risk to your business.

Business Contract Review Checklist

Before you have an attorney review your legal documents, you should also review them to make sure that you understand the basics of what you are agreeing to. Below are a few issues you will want to pay special attention to:

  1. Each party should be clearly identified. The contract should also be clear that the people signing the contract on behalf of the organizations have the authority to do so.
  2. The language of the contract should be precise. Phrases like “as soon as possible” or “timely” may mean wildly different things to different people. Use specific date ranges and amounts instead of generic terms.
  3. Make sure you understand how disputes will be resolved. Pay special attention to any clauses that waive liability.
  4. The duties and responsibilities of each side should be described in detail. There should be no ambiguity about what each side is promising, and when each side promises to make good on their commitments.
  5. Are there any clauses that allow the contract to be terminated if it is not working to one or both side’s satisfaction?

Even if you have years of business experience handling contracts, you will still want to have a contract lawyer review your legal documents. Not only will a lawyer be able to give you insights into the legal aspects of the document, they will also provide you with an outside perspective.

Having a lawyer conduct a contract review protects your business from making mistakes and can also open you up to new opportunities.

Downtown Orlando Office

790 N. Orange Ave
Orlando, FL 32801
Phone: (407) 259-2426
Toll Free: (866) 801-2636
Fax: (407) 391-3626

Metrowest Orlando Office

7065 Westpointe Blvd., Ste 311
Orlando, FL 32825
Email: contact@walshbanks.com

About

Walsh Banks Law is a boutique law firm located in Orlando, Florida. We specialize in business law, real estate law and commercial litigation.