By: Omaima Poonawala
1. Do not attempt to avoid legal fees by preparing your own contracts. Often times, when businesses and startups do this, it leads to costly and time-consuming mistakes that could have been avoided by simply hiring an attorney to prepare the documents. Contracts must be narrowly tailored to the particular transaction at hand. Although there are many templates easily available online that may appear to suit your needs, such templates typically require extensive modification from client to client. A qualified legal professional will have the expertise to quickly spot which provisions need editing and can prepare your agreement accordingly.
2. Seek legal assistance as early as possible in the transaction. Attorneys can assist throughout the entire contractual process including drafting letters of intent, negotiations with the other side, and more. Do not wait until after the contract is signed to hire counsel.
3. Always have an exit strategy. Many startups or businesses entering into partnerships or joint ventures with one another fail to consider the possibility that the business may not work out as planned. Additionally, a founder may have to leave the company due to unforeseen circumstances. In such scenarios, it is important to specify the method for company dissolution, transfer/buyout of shares and repayment of debts and capital contributions.
4. Articulate a dispute resolution process. People typically avoid this discussion as it can be awkward and uncomfortable. However, it is essential to outline how disputes are to be handled, should they arise. This will save you considerable time and money in the long-run. It is also important to specify where dispute resolution should take place, especially for those engaging in multi-state operations. Do not wait until after something goes wrong to consider this.
5. Hire your own attorney. Each business or startup involved in a transaction should hire their own attorney. While attorneys may represent parties on both sides of a transaction (with the written consent of both parties), it is best to hire your own attorney. That way, you can be assured that somebody is looking out for your interests alone. In cases when attorneys jointly represent both clients, they have to remain unbiased in the event of disputes.
6. Consistently define terms and phrases used throughout the contract. It is important to maintain consistency throughout the agreement at all times. For example, if the term “purchase price” is defined as $15,000 in one section of the document but as $10,000 in another section, this will result in ambiguity and confusion. The validity of the entire agreement may be called into question.
7. Be specific. Spend some time meticulously going through all of the key details involved in the transaction. Avoid using vague descriptions as much as possible, especially when money is involved. Although certain details may appear to be common sense, that may not be the case 2-3 years down the road. This can lead to disputes between the parties. In such instances, a third party such as a judge or mediator may have to get involved in order to determine the true intent of the parties. Take the time to flesh out all of the details so that all of the parties will be better off in the long run.
8. Outline the rights and responsibilities of each party. In any contract, it is essential to articulate, as specifically as possible, the obligations of each business. Prior to commencing business, each person should have a clear understanding of what is expected of them. It is important to memorialize each party’s rights and responsibilities in writing, in the contract itself – even if this has been previously agreed upon orally or via email. This will help to prevent disputes and disagreements between the companies.
Disclaimer: This blog is made available by Carroll Counsel PLLC for educational purposes only. It is our intent to give you general information and a general understanding of the law, not to provide specific legal advice. Use of this blog does not create an attorney-client relationship between you and Carroll Counsel PLLC. You should not act upon the information on this blog without seeking advice from a lawyer licensed in your own state. Please note that you should not send any confidential information pertaining to potential legal services to Carroll Counsel PLLC or any of its attorneys until you have received written agreement to perform the legal services you requested. Unless you have received such written confirmation, we will not consider any correspondence you send us as confidential. The information on the blog may be changed without notice and is not guaranteed to be complete, correct, or up-to-date. While we try to revise the blog on a regular basis, it may not reflect the most current legal developments. The opinions expressed on this blog are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.
1. Do not attempt to avoid legal fees by preparing your own contracts. Often times, when businesses and startups do this, it leads to costly and time-consuming mistakes that could have been avoided by simply hiring an attorney to prepare the documents. Contracts must be narrowly tailored to the particular transaction at hand. Although there are many templates easily available online that may appear to suit your needs, such templates typically require extensive modification from client to client. A qualified legal professional will have the expertise to quickly spot which provisions need editing and can prepare your agreement accordingly.
2. Seek legal assistance as early as possible in the transaction. Attorneys can assist throughout the entire contractual process including drafting letters of intent, negotiations with the other side, and more. Do not wait until after the contract is signed to hire counsel.
3. Always have an exit strategy. Many startups or businesses entering into partnerships or joint ventures with one another fail to consider the possibility that the business may not work out as planned. Additionally, a founder may have to leave the company due to unforeseen circumstances. In such scenarios, it is important to specify the method for company dissolution, transfer/buyout of shares and repayment of debts and capital contributions.
4. Articulate a dispute resolution process. People typically avoid this discussion as it can be awkward and uncomfortable. However, it is essential to outline how disputes are to be handled, should they arise. This will save you considerable time and money in the long-run. It is also important to specify where dispute resolution should take place, especially for those engaging in multi-state operations. Do not wait until after something goes wrong to consider this.
5. Hire your own attorney. Each business or startup involved in a transaction should hire their own attorney. While attorneys may represent parties on both sides of a transaction (with the written consent of both parties), it is best to hire your own attorney. That way, you can be assured that somebody is looking out for your interests alone. In cases when attorneys jointly represent both clients, they have to remain unbiased in the event of disputes.
6. Consistently define terms and phrases used throughout the contract. It is important to maintain consistency throughout the agreement at all times. For example, if the term “purchase price” is defined as $15,000 in one section of the document but as $10,000 in another section, this will result in ambiguity and confusion. The validity of the entire agreement may be called into question.
7. Be specific. Spend some time meticulously going through all of the key details involved in the transaction. Avoid using vague descriptions as much as possible, especially when money is involved. Although certain details may appear to be common sense, that may not be the case 2-3 years down the road. This can lead to disputes between the parties. In such instances, a third party such as a judge or mediator may have to get involved in order to determine the true intent of the parties. Take the time to flesh out all of the details so that all of the parties will be better off in the long run.
8. Outline the rights and responsibilities of each party. In any contract, it is essential to articulate, as specifically as possible, the obligations of each business. Prior to commencing business, each person should have a clear understanding of what is expected of them. It is important to memorialize each party’s rights and responsibilities in writing, in the contract itself – even if this has been previously agreed upon orally or via email. This will help to prevent disputes and disagreements between the companies.
Disclaimer: This blog is made available by Carroll Counsel PLLC for educational purposes only. It is our intent to give you general information and a general understanding of the law, not to provide specific legal advice. Use of this blog does not create an attorney-client relationship between you and Carroll Counsel PLLC. You should not act upon the information on this blog without seeking advice from a lawyer licensed in your own state. Please note that you should not send any confidential information pertaining to potential legal services to Carroll Counsel PLLC or any of its attorneys until you have received written agreement to perform the legal services you requested. Unless you have received such written confirmation, we will not consider any correspondence you send us as confidential. The information on the blog may be changed without notice and is not guaranteed to be complete, correct, or up-to-date. While we try to revise the blog on a regular basis, it may not reflect the most current legal developments. The opinions expressed on this blog are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.
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