Introduction
Most contracts are not required by law to be in writing but a written contract preserves the intent of the parties and makes sure that there is no confusion if a dispute arises in the future. Contracts are a safety net, if everyone was completely trustworthy with a perfect memory they would be useless, but we draft contracts in anticipation of a future problem. Unfortunately, contracts are static but the laws and situations they are based on are not. If you take the time, and money, to have your agreements professionally prepared you should periodically pull them out of the drawer and take care of them so that they can take care of you when you need them. The following are a few examples of reasons to perform an audit of your legal documents.
Technology Policies
Most employment agreements do more than just set the salary of an employee and the number of vacation days allowed. These agreements contain employee policies and workplace procedures that must be followed, and the more complicated and high-profile the position, the more restrictive these agreements are of work, and even some personal, activities. There was a time when having an e-mail or computer policy seemed ridiculous and overly controlling but today these are commonplace clauses in most employee contracts. Now, more and more companies are adding policies for cell phones and even social networking sites. If your employee policies don't include the word "Twitter," chances are they need to be reviewed.
"Personal" Online Activities
The Federal Trade Commission (FTC) recently released updated guidelines aimed at protecting consumers from potentially misleading endorsements. Under these new rules, an employer could be liable for statements made on non-employer maintained websites (such as personal blogs, MySpace, Facebook, and Twitter) by employees. Employees are now required to disclose their relationship to an employer when making endorsements even if those endorsements reflect their own thoughts, opinions, and beliefs. A misleading statement by an employee made on one of these social networking sites can expose an employer to expansive liability but I'm guessing most employees won't consider such activities damaging, or even covered by the terms of their employment.
Non-transferability Clauses
When parties come together to form a contract they usually only want to deal with the other party and require that the terms of the contract are nontransferable without their written consent. These types of clauses are generally not argued about and present few problems, that is, until a Court decision in September of 2009. In the case of Cincom Sys, Inc. v. Novelis Corp., the 6th Circuit held that a nontransferable software license was violated when a party to the contract merged with another subsidiary of its parent company, thereby changing its corporate structure. Because this type of language that prevents transfer or assignment of a contract is so common it is highly recommended that an audit be performed in advance of any mergers or sales.
Conclusion
Form contracts and templates may save your business money in the short term but developing a good relationship with a law firm that knows your business and your industry can be invaluable. Contracts are only useful if they anticipate future problems and stay up-to-date with recent developments, both legal and technological. Take care of your legal documents and they will take care of you.
