Why Should You Hire A Contract Lawyer?
7 Reasons To Hire A Contract Lawyer
Written by Gregory L. Phillips, Founding Partner
Hiring a Lawyer for Contracts is a Risk Management Strategy, not a Necessary Evil
Relationships are the lifeline of any business; however, it’s the actual contractual agreements that legally bind business arrangements together. Contractual business relationships touch every part of a company’s operations, from employees, suppliers, and business partners, to investors, customers, and landlord. The legal contracts ensure that your obligations and the obligations of others are met in your contracts, every sentence, every word, and every piece of punctuation matters. The contract is more than the tool for enforcement of commitments, it helps the parties think through the relationship and the risks and duties that must be apportioned.
In numerous cases (refer to Chapter 2, The Complete Guide to Contract Law & Negotiation), a single ill-defined term or misplaced comma, or vague and sloppy writing, has cost companies millions of dollars. These aren’t isolated cases. Contractual disputes are one of the common reasons for litigation.
Around 36%-53% of small businesses are involved in litigation at least once annually. Given the risks of litigation as a genuine concern, the role of contracts is critical and can be intimidating.
But they don’t have to be.
While the risk of litigation cannot be eliminated, delegating the drafting, review, negotiation, and execution of contracts to legal experts, such as lawyers well versed in contracts, can minimize the risks of going to court.
This discussion will show the numerous advantages of hiring a lawyer specialized in contract law, including, but not limited to, making sure your contracts are enforceable, equitable, and will protect you against potentially devastating liabilities.
What Is A Contract?
To start, it’s helpful to understand the legal definition of a “contract.” A contract is a promise or a set of promises, between parties creating mutual obligations enforceable by law. An “enforceable” contract simply means that if a promise is broken, the harmed party can sue to be remedied and recover the damages incurred as a result of that broken promise.
Under contract law, which consists of centuries of case law (i.e., common law) and state statutory law, not all agreements between parties are considered to be legally binding contracts. For a contract to be legally binding, it has to contain five key elements:
One party extends an offer to take some action or refrain from acting in exchange for a set of agreed-upon terms. The terms should be clearly defined. For example, an employer offers a job to a potential employee for a specified compensation and benefits package.
For a contract to exist, the offeree (the person accepting an offer) must say “yes” and agree to the terms of the offer in the manner specified. The agreement can be either oral or written and can occur by phone, by mail, in person, or through a simple handshake or other means. Using the above example, an employee accepts the employment offer by signing the offer letter, thus sealing the deal.
Consideration and Mutuality of Obligation
Each party must provide something of value that induces the other to enter the agreement. This exchange is called “consideration.” Generally, consideration is expressed in a monetary amount, but it can also be giving something of value, including a right to do something. Closely related to the concept of consideration is the mutuality of obligation, which simply means both parties are bound to perform their obligations. Employees perform their duties, and employers provide compensation in return. Employers cannot choose to pay their employees at their leisure while demanding employees to perform their duties since this would be against the contract.
Also called “meeting of the minds”; it is the moment when all parties mutually agree to the terms of the contract.
Competency and Capacity
Each party must be fully able or have the legal capacity to enter into the contract for it to be considered valid. You can’t have a valid contract by offering employment to a six-year-old, for example. Likewise, a contract with a person deemed mentally incapable of coming to a “meeting of the minds” would also be invalid.
A legally binding contract does not have to be written; although, some are required to be in writing, such as contracts involving real property. Oral agreements are enforceable too. However, in the world of business, most contracts are written.
When someone does not follow the agreed-upon terms or fails to fulfill their end of the bargain, it is called a “breach of contract.” When a contract is breached, or allegedly breached, parties may wish to enforce the agreement or may try to recover value for any financial harm caused by the alleged breach.
7 Reasons to Hire A Houston Business Lawyer for Your Contracts
Anyone can draft a contract.
There are numerous templates you can find online which can be edited to suit your needs. However, freely available one-size-fits-all templates derived from the internet are not the best way to reduce your risk of exposure. These DIY contracts may save you money in the short term but cost you thousands and even millions if the agreement doesn’t hold up to legal scrutiny in the future.
Generic contracts are often poorly written, fail to address potential liabilities, and may fail to protect your specific interests. Not only do you risk potential conflicts down the road, but contractual disputes can also break up long-held business relationships, destroy a company’s reputation, distract your staff from growing the business, and even bankrupt your company.
Most businesses don’t necessarily retain contract expertise on staff. Even many Fortune 500 companies don’t keep contract lawyers directly on their payrolls. Instead, companies often make the wise decision to consult with a contract lawyer to help draft, edit, review, or negotiate and execute essential contracts.
Involving experts to help you draft, review, and/or negotiate contracts can nip potentially costly contractual conflicts in the bud. Contract lawyers can make sure contractual relationships continue to be powerful assets, and not ticking time-bombs that could lead to unnecessary litigation and exposure of liabilities.
Contract lawyers by your side can provide these seven compelling advantages:
1. Help you better understand the contract.
Even if you have the patience to read through all the terms and conditions of a contract, there is often a mountain of legal jargon that requires a nuanced understanding of contract law. Contract lawyers can break down the provisions of the agreement clearly and clarify the true meanings of the clauses as well as point to critical provisions you may have disregarded or missed.
Contractual disputes are generally not caused because one party is intentionally trying to harm another. More often than not, differences occur because the parties have different assumptions about how the relationship should work. In other words, it comes down to interpretation. The parties may have verbally reached an agreement, but that does not mean that they have reached a true meeting of the minds. Contract lawyers can ensure the document accurately represents the intent of all parties involved to preempt misinterpretation.
2. Identify potential liability isses and resolve them.
A business lawyer drafting a contract often assists the parties in filling in the gaps in their discussions that, left unaddressed, would lead to a lack of clarity in the contract. Also, sometimes, a contract is incomprehensible not because of the legal jargon, but simply due to inadequate legal writing. Many standard contract terms can be confusing and ambiguous. Sloppy writing could, for example, result in a contract with loopholes ripe for abuse. Contract lawyers can spot and fix poorly written contracts by minimizing gaps and ensuring the language protects your interest.
3. Ensure the contract is valid and legally enforceable.
Contract law is a complex field. You may think you are entering a binding contract, but if it leaves out key elements, you may not have a contract at all. It will leave your organization wholly vulnerable and without avenues for remedy if the other side doesn’t meet their obligations. A contract lawyer reviews and ensures that an agreement is enforceable in court or through arbitration.
4. Ensure new regulations and applicable state laws are considered.
Contracts online may be outdated. More importantly, an online template rarely takes individual state laws into account. You probably don’t have the time to keep up with new laws or regulations. This is particularly true for businesses that operate between states. But knowledgeable contract lawyers will be up-to-date with legislative changes and new case law. A good contract lawyer will know precisely how to tackle differing state laws and help your business navigate the complexities inherent in a patchwork system.
5. Offer new perspectives and make suggestions.
Identifying what is NOT included in a contract is just as important as knowing what is IN a contract. Lawyers are well-versed in identifying worst-case legal scenarios and writing provisions into contracts that plan for and address those scenarios. Take the recent COVID-19 pandemic, for example. Many business owners found their contracts essentially worthless when their partners failed to meet their obligations.
Contract lawyers have vast experience working on contracts with many clients and know what to look out for. They bring relevant knowledge from other clients in a similar industry to yours. That means business lawyers with experience in a particular industry can spot and avoid common pitfalls, identify contract loopholes you may have missed, and negotiate better terms with partners.
6. Respond to a breach.
If it comes to a contract dispute or breach, a contract attorney can help you navigate the complex legal system from beginning to end. They can lay out your options, advise you on the best course of action to resolve the situation, and help you avoid costly litigation over contract disputes.
7. Advocate on your behalf.
When you hire a contract attorney before or during the negotiation phase, you are adding a powerful advocate to your team. This is invaluable when negotiating for better terms and prioritizing your organization’s interests. Contract attorneys don’t merely point out mistakes; they can be creative and propose alternatives that may further the goals of your company.
Give Your Business Contracts the Legal Attention They Deserve
The terms and clauses in a contract can have direct financial consequences for your business. A well-written contract that is strategically aligned with your business interests is an incredibly valuable guarantor that the obligations to you will be met.
Every business deserves that peace of mind and contractual protection. To ensure your contracts will stand up to scrutiny, it might make sense to delegate the writing, reviewing, negotiation, or execution of your contracts to an expert. Delegating this critical task to a knowledgeable contract attorney is one of the best ways to manage risk. Think of it as a preventive measure that could yield enormous dividends in peace of mind and reduced risk exposure.
The consequences of a poorly written or not having a contract in the first place can be severe. It’s certainly a worthwhile expense that will help your company enter into robust, air-tight contracts that do what they intend to do – foster relationships and expand your business.
No more wasting time in litigation over a single misplaced comma.