Reading, Writing, And Protection - Black Enterprise

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Black Enterprise Magazine July/August 2018 Issue

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We all know the saying an ounce of prevention is worth a pound of cure. This is proved true when you consider the financial burden and stress placed on your company due to a dispute that has gone to court. Establishing protocols through written contracts, reviewed by a competent attorney, can help your business avoid misunderstandings, as well as the costly legal actions that come with them.

“Written contracts detail how things are to be done, what is expected, what is reciprocated, and what time frames are to be observed by the parties,” says Craig Owen White, a corporate attorney and partner in the Cleveland-based office of Hahn, Loeser & Parks L.L.P. “For businesses that believe they have been shortchanged in their dealings with another party and find themselves headed to court anyway, written contracts provide the ammunition needed to pound out a cure.”

Whether your business is destined to land in court or not, completely understanding every contract that hits your desk is the surest way to keep your growing enterprise healthy, wealthy, and wise.

“The average small-business owner focuses on the economic terms of the transaction–the bottom line–dismissing other terms of written contracts as mere boilerplate,” says White. When this happens, important details go ignored at the entrepreneur’s peril.

White lists three commonly overlooked provisions:

  • Limitations on indemnification (damages recoverable from your business partner).
  • Deadlines that must be observed in order to protect or enforce a right.
  • Affirmative obligations or duties imposed upon your company. The failure to observe them may give rise to counterclaims or offset your rights.

Ignoring these details, says White, is a bad habit. “Minority businesses tend to view contracts as boom or bust, with no expectation of relief for a bust and no thought of dealing with the myriad of situations that fall between the two.” Because they are unaware of their contracts’ full provisions, it is rare to find a minority business as a plaintiff in a commercial case, he says.

Constructing a Contract
As a small business leader, it is important that you familiarize yourself with the elements of a contract, leaving you more confident in discussions with your attorney. White offers this information as a quick guide to help you get started.

There are three basic elements to every contract:

  • “Offer” or formal quotation with price details.
  • “Acceptance” by a competent party. Only what is offered can be accepted.
  • “Consideration” is a legal term meaning the exchange of things of value (e.g., money for services).

Most contracts are not required to be in writing. However, it is highly recommended that contracts be broken down in writing so that there is a clear understanding of what has been agreed upon. For convenience, businesses often prepare standard contracts to use with all of their clients. These can then be tailored to specific jobs by filling in blank spaces or providing attachments. Warranties, which guarantee that products and services meet certain specifications, may also be attached

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