I've been practicing corporate law for 40 years. And I've been privileged to work with many talented business people. One of the most talented was the late Fred Meijer, who always wanted his legal team to not only be good lawyers but also to protect the company by searching out business gaps - and filling them. So, partnering with my Meijer business clients, that's what I did, and that's what I'm still doing for other companies.
But some companies suffer from dysfunctional contracting. In my experience, the following failed business practices are common in the business world:
1. Poor Contract Management and Retention. Does your company have a single point of contact for your contracts? In smaller firms, this could be your CFO. This person should double as your records retention officer who should be charged with the maintenance and enforcement of a corporate records retention manual. Why do you need a records retention manual? Because without it some of your departments will keep their records too long and others won't keep them long enough. And when you are sued and asked to produce certain corporate records as part of the discovery process, you won't be able to produce them or can't find them. Good luck telling this to the court in resisting opposing counsel's request for sanctions because of your failure to produce for no good reason.
2. Your Website Contracts Aren't Enforceable. In this day and age, everything is on the web, and many companies post their standard corporate contracts on their websites for their suppliers and customers. Congrats, you're saving paper! But are your website contracts legally enforceable? I wrote about this topic here, and it deserves another read. You can have the best-drafted contracts in the world, but they are meaningless if not binding on the other party.
3. You Don't Understand Your Contracts. If you are a corporate officer, you have fiduciary duties to your company. These non-delegable obligations include the need to actually understand your contracts. Here are some of the key provisions in your contracts that you should, with the help of your lawyer, grasp:
- indemnity
- confidentiality
- intellectual property ownership
- governing law
- dispute resolution
- insurance
- liability limitation
- waiver of certain damages
Regarding these provisions as simply "legal stuff that my lawyer understands and I don't need to" is foolish, because how they operate will impact your bottom line - for good or for ill.
4. Your Contracts Suck (probably that's why you don't understand them). Excuse the vulgarity here, but it's a tribute to the late, great singer and humanitarian Harry Chapin, whose bandmates used the term to describe the different endings that Harry wrote to his 30,000 Pounds of Bananas song. (Undaunted by Michigan winters, Harry would often appear in snowy Grand Rapids circa 1978 for a concert or two.) So why do your contracts suck? Go here for the answer. Maybe you think that your contracts are the best thing since sliced bread. Really? A quick test is to bring up the Word versions on your screen and search for: "and/or," "notwithstanding," "whereas," "execute," or "witnesseth." If any of these terms appear, your contracts, quite simply, suck. And sucky contracts are often litigated.
5. You Don't Have Proper Employee Agreements. Gone are the days when your management employees stayed with you indefinitely. What they learn working for you (and the intellectual property that they create) could well benefit your competitor. To prevent that you must have appropriate and enforceable agreements with your employees that give you ownership of all intellectual property that they create while working for you, requires them to keep your business information confidential, and prevents them from competing with you after they leave your firm.
These failed business practices are only exacerbated by the CV-19 pandemic, when management employees responsible for contracting practices are dispersed and likely occupied with thinking how to mitigate the pandemic's impact on day-to-day business operations. Nevertheless, you're betting your company's financial stability (and your own career) if you decide to do nothing to remedy these (entirely fixable) conditions.
If you do need fixes for these failed business practices, I'd be pleased to help.
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If you find this post worthwhile, please consider sharing it with your colleagues. The link to this blog is www.busklaw.blogspot.com and my website is www.busklaw.com. And my email address is busklaw@charter.net. Thanks!
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