Skip to main content

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 your contract uses similar legal terms for the parties' names, chances are that the parties are misidentified somewhere in the contract.  

>Agreement Term (Duration). Are you working from an expired contract? Do you know when your contract expires and whether it can be renewed? In the recent California case of Olive v General Nutrition Centers, Inc., GNC failed to keep track of releases from 16 models used in their advertising, and their photos were used after their releases had expired. 15 of the 16 persons settled with GNC for sums ranging from $5K to $32K, but the 16th person, one Jason Olive, decided to sue for misappropriation of his likeness under California law. The jury awarded him $1.1M, less than what Olive sought but a lot more than what GNC paid to settle with the other models. That's what can happen if you fail to track the expiration dates and renewal provisions in your contracts. Have you checked yours?  How hard is it to keep a spreadsheet of your contracts that contains a summary of their important terms, including expiration dates and renewal provisions? 

>Payment Provisions. Are the payment provisions in your contracts clear, as in who is to be paid, how much is to be paid, and when payment is to be made? And what happens if payment isn't made when due? And must you pay the other party if they are in breach of the contract? Do the payment provisions in your contracts protect you while being fair to the other party? Has your finance area signed off on these payment terms?

>Intellectual Property (IP) Rights. If your contract is for your (or the other party's) services that produce something to deliver to you (or the other party), who owns the IP rights to the work product? Imagine believing that you could re-purpose some or all of a work product for your other customers only to find out that you conveyed all your IP rights to your original customer. Allocation of IP rights can be tricky. Do your contracts properly address who gets (and keeps) what IP rights?

>Confidentiality. These provisions are often one-sided in the sense of protecting one party's confidential information but not the other party's. Regardless of the parties' roles and responsibilities, confidentiality provisions should be mutual and contain exceptions for information that is already publicly known or in a party's possession without breach of the contract. And how long the confidentiality provisions bind the parties after the agreement's expiration or termination should be stated. Do the confidentiality provisions in your contracts satisfy these criteria?

My February post will continue this inquiry, but in the meantime, I'd be interested in hearing the results of your audit and helping you with any questions (just email me at And remember that three things in life are true: death, taxes, and that addressing these concerns in your contracts now is a lot less trouble (and cheaper) than having to argue about (or litigate) them when they emerge later.  

It's 2019, what's in your contracts?  

If you find this post worthwhile, please consider sharing it with your colleagues. The link to this blog is and my website is And my email address is Thanks!


Popular posts from this blog

The BUSKLAW April Newsletter: Pulling Apart the Purchase Agreement for the ICON A5: "The Jet Ski with Wings"

The ICON A5 is an amphibious "light-sport aircraft" that is marketed primarily to adventurous amateur pilots with deep pockets (and spacious home garages in which to store their ICONs). The plane has a recreational focus; it can seat only two, has limited load capacity, and isn't intended to go very far. The cost of the plane was $139K when first introduced in 2006 but is now $389K for a "fully-loaded version."

YouTube is full of videos showing how much fun you can have with an ICON A5 (especially with water landings and take-offs), bringing to mind the "jet ski with wings" analogy. So the ICON A5 is perhaps the ultimate high-tech, outdoor adult toy (unless you're afraid of heights). There have been several fatalities with the A5, but these apparently resulted from pilot error in one case and reckless flying in another rather than from mechanical defects or design flaws. 

The ICON A5 Purchase Agreement (including the Operating Agreement as Exhibit B…

The BUSKLAW September Newsletter: Lawyers and Their Goofy Words - and What to Do About It

Growing up, I was told that lawyers were smart cookies. After all, getting a law degree isn't an easy task. You first go to college and find a subject that is best suited to how your brain works so that you can maintain a high GPA. In my case, I quickly discovered that I wasn't a good fit for the "hard sciences." So I took a lot of Political Science and English courses, learned how to write fairly well, suffered through the tedious law school aptitude test on October 20, 1973, graduated with a B.A. degree in 1974 and then went on to law school. There, I endured a legal education infused with the Socratic method (here's an example), suffered occasional migraines (because some of my law professors were truly smart but couldn't teach) and graduated with my law degree on Mother's Day, 1977. Passed the Michigan bar exam and by God, became an honest-to-goodness lawyer in November of 1977!

So having gone through undergraduate studies, law school, and the bar exam…

A BUSKLAW Newsletter Aside: We Speak Information Technology Law

When I describe my legal specialty as information technology ("IT"), the common response (along with a puzzled look) is, "what does that mean?"

Short answer: "It means a lot." 

Because there isn't a business in existence that isn't affected by something IT related. Does your firm have a website that collects personal information? Then you should have terms of use (and a cookie policy) that comply with state and federal laws, regulations, and the GDPR. Do you sell things on your website and accept credit cards as payment? Then you must institute payment card industry data security standards to protect that credit card data from hackers. And you also must have credit card agreements with your card companies and processing bank that contain indemnity and other "bet your business" obligations. In my experience, credit card agreements are notoriously one-sided and chock full of legal jargon. Have you read yours?  

Apart from those considerations…