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 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, among other things, looking to see if there are 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 be 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 our contract 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.