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The BUSKLAW February Newsletter: "What's in Your Contracts?" The Case for Auditing Your Contracts (Part 2)

In last month's newsletter, we discussed the importance of auditing your business contracts and pointed to five potentially troublesome provisions: identification of the parties, agreement term, payment, intellectual property rights, and confidentiality. But there are additional provisions that deserve careful scrutiny:

> Indemnification. To understand this concept, start with three players: the parties to the contract (call them Able and Baker) and a third player who isn't a contracting party (call him Charlie). Let's say Able manufactures widgets, Baker sells them in its retail stores, and Charlie is a customer who purchases an Able-produced widget from Baker. The widget injures Charlie. Charlie's lawyer sues Able and Baker because Able produced the widget and Baker sold it to Charlie. Baker's only involvement was selling the widget, so he tells Able to take care of it, i.e., defend him in the lawsuit and pay the settlement or the court judgment if the case goe…
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The BUSKLAW January Newsletter: "What's in Your Contracts?" The Case for Auditing Your Contracts (Part 1)

It's 2019! Time to dust off the real - or virtual - dust covering those contracts in your real - or virtual - file cabinet and take a look at them for potential problems waiting to blossom into disputes that could lead to costly litigation. So pick one of your more important business contracts and review the following provisions to see if any of these concerns hit home:   

>Identification of the Parties. For some reason lost in the annals of time, lawyers often identify the contracting parties with names that are similar, as in "Licensee and Licensor," "Lessor and Lessee," and "Obligor and Obligee." But this practice is ill-advised because the drafter is susceptible to using the names incorrectly, and the reader must stop and figure out their meaning based only on the last two letters of the name. So rather than use these confusingly similar names, why not simply use the real names of the parties after first identifying their legal relationship. If …

The BUSKLAW Newsletter: What We Discussed in 2018

'Tis the week before Xmas and a good time to look back on the topics that we covered in 2018. So have some eggnog (or a nice Pinot Noir), play this Xmas music, and let's reminisce: 

>January: we reviewed recent cases proving that in a contract, every word has meaning.
>February: we discussed the best response when you receive an unsolicited product idea from a customer.
>March: we pondered the scenario of whether a disgruntled buyer of a haunted house can sue and get some relief.
>April: we examined the effect of an "immortal soul clause" buried in a website's terms and conditions.
>May: we discovered that mere pressure to sign a contract isn't sufficient to void the contract for duress.
>June: No post - on family business.
>July: We found out what happens when you horse around with non-compete clauses.
>August: No post - on family business.
>September: We determined what you can do about lawyers who use goofy words.
>October: We sussed ou…

The BUSKLAW December Newsletter: A "Condition" Does Not a "Promise" Make

It has been called black gold and Texas tea. It can make hillbillies rich enough to move to a Beverly Hills mansion. If you own some acreage, you might have it and not know it. In the early 1900s, speculators (colorfully called "wildcatters") would look for it and if found, they often became today's equivalent of Job and Gates. And Michigan had it in abundance.

We are talking about crude oil. Even with market fluctuations and oil's effect on global warming, you can still make some money having it extracted from your land. Just ask the Allens of Pennsylvania, who had high hopes when the SWEPI company came calling to look for oil on their property. So the Allens signed SWEPI's mineral rights lease that stated in part:

[This Agreement] is made on the condition that within 60 days from the Effective Date of this lease, [SWEPI] shall pay to [Allens] the sum of $2,000 per acre for the first year.

The 60 days came and went and SWEPI didn't pay a dime to the Allens. All…

The BUSKLAW November Newsletter: I Can't Get No (Accord and) Satisfaction

Little did Mick Jagger know that if only he had added a few words to this rock classic he would have been singing about a classic doctrine in contract law: accord and satisfaction. This doctrine may elicit a "so what," but if you operate a business that invoices and receives payments from customers, you need to know about this doctrine - or face the real potential of economic loss. So bear with me. 

Accord and satisfaction is roughly equivalent to a compromise and settlement. In contract law, according to Professor Garner in his Dictionary of Legal Usage (3rd ed.), "an accord is an agreement to substitute for an existing debt or obligation some alternative form of discharging that debt; a satisfaction is the actual discharge of the debt by substituted means."

Accord and satisfaction issues commonly arise where a debtor tries to pay less than the amount invoiced for goods or services by a notation on the debtor's check that it's tendered in full payment. For e…

Calling All Consultants! You Need a "Form" Consulting Contract! (A BUSKLAW Newsletter Aside)

I'm fortunate to have many contacts on LinkedIn, and many present themselves as "consultants." That term is broad enough to encompass such heavy hitters as Accenture on one hand to a retired respected Meijer vice president on the other.

But all consulting firms - whether large or small or somewhere in between - have one thing in common: they need an effective "form" contract for their clients. The reason? To state, in plain language, the necessary business and legal provisions that govern their relationship. The purpose of these provisions?

First, to state the parties' rights and duties applicable to the consulting services to be provided. 

Second, to avoid a disruption to the parties' relationship down the road by preempting problems before they occur. 

Do you think that consulting agreements must be lengthy and dense? Balderdash! 😏

An acceptable consulting contract, especially for smaller engagements, can be as short as 2-3 pages. I know because I've …

The BUSKLAW October Newsletter: Are "Efforts" Provisions in Contracts Worth the Effort?

OK, class (as in budding students of contracts and astute readers). Launch your word processing or Adobe™ Acrobat Reader software and open one of your longer business contracts. Pull up the text "find" feature and search for the following three contractual phrases:
best efforts commercially reasonable effortsreasonable efforts Do you have any hits? Regardless, have you ever wondered what these phrases mean? Whether you are on the receiving or giving end of these "efforts"provisions, you should know what you're in for! 

The short answer is not a lot. But keep reading

Many contracting-drafting lawyers are enamored by these phrases. If their client is on the giving end of a contractual duty, they use "commercially reasonable efforts" to perform that duty. But if their client is on the receiving end of a contractual duty, they will argue for a supposedly higher performance standard: "best efforts." But in the words of the infamous Captain Hook, h…