Written by attorney David J. Abeshouse

Don’t Be Penny-Wise and Pound-Foolish With Contract Law

Many start-ups, professional practices, and other small businesses lack line-items in their budgets for legal representation. But they place themselves (and their owners) in considerable peril when they forego having solid written business agreements. Owners of businesses and professional practices often assume that they have workable understandings with their vendors, associates, and partners. These assumptions often are misguided, because even the process of negotiating an agreement reveals possible future pitfalls and misconceptions that should be addressed now, before they become mortal issues. Lack of a written agreement often means there hasn’t been a true meeting of the minds.

Absent a well-written agreement, all too often something goes very wrong, and then there’s hell to pay in terms of cost, disruption, risk, and other adverse consequences (such as court litigation) of failing to have solid written agreements in place. Having the right business agreements in place is not an absolute guarantee that you’ll be able to avoid misunderstandings, but it helps protect you and your business or professional practice.

Here’s part of the problem: When faced with legal issues, many try the DIY (do-it-yourself) route, figuring that they’re smart, experienced business people, and therefore should be able to modify old contract forms, and/or find sample contractual provisions online, and cobble them together into a workable agreement. Some of the pitfalls with this approach, however, include that many aspects of the law aren’t intuitive, many words have legal meanings different from their common meanings, various contractual provisions interact differently in different circumstances, and the education and experience of lawyers trained in the area of drafting contracts should not be lightly ignored. DIY-ers usually find themselves in a situation akin to steering a rudderless ship, or trying to fix electric wiring or plumbing without the right knowledge or tools. The results (misdirection, shock, and flood) are the same, and the hapless business owner ultimately pays a far greater price down the road in terms of liability, disruption, business risk, and yes, eventual expenditure of legal fees.

I can speak neutrally (and I hope informatively and compellingly) on this because I’m not the lawyer who drafts the agreements for the professional practices and other businesses, so I have no self-interest here. Instead, I’m either the lawyer who represents one side or the other in litigation or arbitration, after something goes wrong and there’s a disagreement that’s not governed by a customized written contract (employment agreement, shareholders agreement, LLC operating agreement, vendor-vendee agreement, services agreement, etc.); or I’m the one who serves as impartial neutral arbitrator or mediator of the dispute.

I all-too-often litigate the results of the parties’ failure to have well-conceived and well-drafted business contracts. So, to help avoid having to consult with me, hire the lawyers who can help craft a solid written business agreement for you. It’s good preventive legal medicine.

Please note that I am licensed to practice law only in NY. This guide is provided for general educational purposes only, and no attorney-client relationship has been formed. It should not be relied upon as legal advice. To the extent unique facts may exist in any give situation, the considerations might possibly change. The response given is not intended to create, nor does it create an ongoing duty to respond to questions. As they say, "Your Mileage May Vary." Best of luck.

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