Contracts 101 – What Clauses Does Your Contract Need?

We hear this all the time – Most businesses that sell goods or services (so, most businesses) have contracts.  However, a lot of the businesses that come to our firm say the same thing: You have a contract, but either 1) You rarely get your clients to sign it, or 2) You got it online or from a peer and don’t really know if it’s comprehensive. 

First of all, let me say – I UNDERSTAND!  When you’re starting or running a business, who wants to focus on nitty gritty details like the provisions in your contract, or even make your clients sign them at all?  Many clients say it feels over-formal, or like you don’t trust your clients, to make them sign an agreement.  It’s common to just hope you’re covered with what you have, or just hope the other party will come through on their end of the bargain. 

If you use these methods, maybe you’ll never run into an issue – Maybe your clients will all pay what they owe for the goods and services you offer, maybe you’ll never be facing an unhappy client with unrealistic expectations and the terms of your deal were never made clear, and maybe if you just continue to contact a client who is past-due on their balance they will ultimately pay what you owe.  However, no matter how good someone is at running their business, problems can arise.  The solution to problems, and often the greatest tool you have to prevent disputes from ever even occurring, is to have a clear contract that lays out each party’s rights and responsibilities.  That way, if the customer has a problem with the goods or services delivered, the payment is late, or there are any issues that arise, you can turn to the “four corners of the document” to head off those issues.

So – either you need a contract or have one and need to have it reviewed.  Wakefield Law is a great place to come to with those needs!  Often, we can review contracts on a flat fee basis and send revision suggestions with quick turnaround.  When we’re reviewing a contract, there are a few provisions that always need to be there.  Here are a few and why they are critical to the review:

1.      Parties to the Agreement:

This seems simple, but every contract has to make clear who the parties are.  Is it two individuals?  Is it an individual and a company?  Two companies?  This is really important because additional bodies of law can apply if a lawyer ultimately is hired, especially if both parties are considered “merchants.”  Another really important part of this provision that always comes up is if corporate parties are in good standing with the states where they do business.  If one party is ABC, LLC and the contract is signed by John Smith, the idea would be that John Smith was binding the LLC to the contract.  However, if ABC, LLC was an inactive corporation due to failure to pay LLC dues, it is possible that John Smith doing business as ABC, LLC could be individually responsible for compliance with the terms of the agreement.

2.      Venue/choice of law/jurisdiction provisions:

These provisions are also ones that we always pay special attention to when reviewing contracts.  Do you want to choose the county, court, or applicable state law in the contract?  The answer to that question is YES.  If you have a company that provides services to individuals all over Virginia, or even in other states, you may want to make clear that Virginia law applies to the contract, and if there is a dispute the dispute will be litigated in the General District Court of Loudoun County, Virginia, for example.  If this is not in your contract, you could be stuck with having to hire an out-of-state attorney and prosecuting a lawsuit in another state, and even need to travel to the state to testify. 

3.      Attorney’s fee provision:

This one might seem like it’s for us, but we promise this provision is there to protect you!  If you have to hire an attorney to enforce your agreement, who is going to pay for your legal fees?  If the other party is the one breaching the agreement, they should be responsible for your legal fees!  At least, the Commonwealth of Virginia agrees that you can put that provision into your contracts.  If you leave this provision out, it might be incredibly expensive and even economically unfeasible to pursue enforcement of your contract. 

Wherever you are in the process of working on your contract – feel free to give Wakefield Law a call!  We can help with drafting, revision, and enforcement of your agreements.  We’re looking forward to speaking with you!  703-771-9740