Business Law 101: 10 Contract Tips Every Business Owner Should Know [Part 1]

http://smallbiztrends.com/2011/03/small-business-news-lessons-in-entrepreneurship.html (last accessed September 22, 2011)

The Story

Small Business News posted an article that gives a set of instructions or “things to know” for those that are interested in entrepreneurship. These include (1) Strategy, (2) Marketing, (3) Taxes, (4) Finance, (5) Self Development, (6) Start Ups, (7) Profitability and (8) Policy. While its true that an enterpreneur should know a little about all of these areas, none of this matters if you don’t know BUSINESS LAW 101. This is critical area and it’s unfortunate that it was missing from the list. I would hate to see an entrepreneur become truly SUCCESSFUL and then LOSE it all because they didn’t know the business legal basics.

In this blog, I will give you five (5) business contract tips every business owner should know. [I know the title said ten (10) but you will have to come back next week for the other five (5) so that I can go into some detail about the first five (5).] These tips are helpful whether you live outside of Georgia or in KLP’s exclusive jurisdiction of Georgia. It’s important to KLP as a law firm to use its knowledge and resources to benefit small business owners and keep them out of harm’s way. Kendrick Law Practice is here to keep Georgia business owners “IN business and OUT of Court” through document drafting, document reviewing and negotiating services as well as business consulting and advice. Visit us online at www.kendricklaw.net to learn more about how we combine comprehensive business and legal services to add value to our clients.

My Perspective: Top 10 Business Tips, Part 1

1. Make sure you have ALL the pages to a contract—generally your signature is the last page. It would be wise if you are drafting a contract to insert page numbers and if you are not drafting the agreement, ask that page numbers be included. Nothing is worse than signing the last page of what you think is a 10 page document only to find out it was missing 5 pages of information (and terms that affect you!)

2. Make sure the ESSENTIAL terms are in the contract. For example, are the parties specifically listed, is the price included, are the services to be  performed or products sold included, is there an beginning and end date, etc? You would want these terms in here not only so that the parties understand their responsibilities but also because if there is a merger clause, terms not included in this document may not become a part of the contract.

3. BEWARE: Contracts based in Georgia are construed AGAINST the drafter! This means if there is a question or ambiguity of the terms in a contract YOU drafted, the Court will interpret the terms in favor of the non-drafting party. Lesson learned: Seek a business attorney, like Kendrick Law Practice (www.kendricklaw.net/clientservices/getstarted.html) for all your document drafting, document reviewing and negotiating needs.

4.Make sure the contract has the signature line in your OFFICIAL capacity with your company, otherwise you could become a personal guarantor. Private parties are able to WAIVE the personal liability protections of a business organization from by contract. Therefore, just because you have a legal separate entity doesn’t mean you cannot be held personally liable if there is a guarantor clause in the agreement making you personally liable or if you sign in your personal capacity. Make sure the signature line has your official position, the business name as well as business information.

5. Save revisions of a contract as well as any other correspondence during the negotiating or contracting process (emails, faxes, tweets, etc.). Not only is it easy reference for you later but can be used as evidence later against the other side so long as there is not a merger clause in your agreement.

Conclusions

All of the items listed by this article are crucial skills and tasks every entrepreneur must juggle and think about. However, if you make LOADS of money and are HIGHLY successful, it can be taken all away because you don’t have the basic legal knowledge to protect yourself. KLP is here to help and we are standing by.

Discussion Question: Do you have any experiences, good or bad, to share with respect to business contracts?

Why Kendrick Law Practice?

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   your company’s investment in us. KLP’s Founder, Dar’shun Kendrick, holds a law degree and Master’s in Business
   Administration.
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