Would you enter into a contract without counsel?
By Tracie L. Clabaugh, Offit Kurman
In this ever-changing economy, many companies try to cut costs by: (i) using verbal agreements, (ii) reusing contracts, or (iii) using "form" contracts found on the internet. Entering into a contract is a significant commitment and investment for all parties involved and you and your company need to be adequately protected. Individuals and companies should make it a point to carefully consider all of the issues involved in a transaction prior to entering into a contract.
Not only should contracts provide the material terms related to the agreement you have with the other party, contracts should provide provisions that will protect you in case there is an event of default, among other things. An attorney can review, prepare and/or negotiate the terms of your contract in order to protect you and your investment. The following five items are provided as an example of some of the issues that should be evaluated and considered with your attorney prior to entering into a contract so that you and your company are adequately protected:
1. Parties: Make sure the contract includes the correct parties. If an individual and a company are both responsible to pay for your services, then include both parties in the contract. If each is to be responsible for the payment in its entirety, it should be clear that their liability is joint and several.
2. Terms: The terms and conditions agreed to by the parties should be unambiguous and clearly set forth in the contract so that your company's expectations will be met and fully satisfied. The terms and conditions should also be tailored to your specific business needs and comply with statutory requirements.
3. Representations and Warranties: The contract should include representations and warranties from the other party that will protect you and your company. You and your company need to be certain that if you agree to certain representations and warranties, they are qualified as being to the best of your knowledge, are limited to a set period of time, and you understand the remedy the other party has if there is a breach.
4. Event of Default: If there is a condition that will trigger default under the terms of your con tract, you need to know the detrimental consequences that you and your company would experience. For example, an event of default in a loan agreement may permit a lender to accelerate the full amount of the loan from the borrower.
5. Statutory Provisions: In some cases, you need to include statutorily required disclosures or other information in your contracts. In the event your "form'' contract does not include these provisions or if you are not aware that these provisions are required, you and/or your company could be liable for certain damages. For example, service contracts are required to provide certain disclosures to a consumer in writing and vendors are required to provide certain disclosures to contract purchasers under the Maryland Homeowners Association Act.
This is not an all-inclusive list of items that should be considered prior to entering into a contract. Identifying and discussing relevant real estate and business issues with an attorney prior to entering into a contract and providing for contractual provisions to resolve, limit or protect against the exposure of such issues will help protect you, your company and your investment.
Tracie L. Clabaugh, Esq.
Offit Kurman, Attorneys At Law, 150 Carroll Creek Way | Suite 340 | Frederick, Maryland 21701, United States
published: July 2015