Continuing our series on the issues you should be evaluating during this period of slower business, we will discuss the clauses that absolutely must be in all of your contracts. These clauses are typically called “boilerplate” and can drastically effect your rights should a dispute arise. It is important to note that I am naming the clauses here in my typical style, but that can be titled in a variety of different ways. It is the content that matters.
Choice of Law – Under contract law, the parties to a contract can agree as to what source of law the courts should look to in deciding the meaning of a contract. In the United States there are 51 different sets of laws that could potentially be used by a judge. There are also rules as to which jurisdictions laws apply. If you are doing, or have the potential for doing, business with people or entities from another state, this clause will trump the courts rules. Selecting the governing law of your home state will save you money in legal research fees if there is a dispute over your contract.
Choice of Venue – As with the Choice of Law clause agreeing to venue where you are located will save you money if there is a dispute. You want home-field-advantage, and a choice of venue clause provides that. Even if your contract is with someone in the same state but in a different area, you can have any potential court proceedings in your home town. Consider the great state of Texas, if you are doing business with a company in Amarillo, they could potentially file a lawsuit in Amarillo making you and your attorney travel twelve hours one-way for any court appearances.
Alternative Dispute Resolution (ADR) – Whether or not a contract should have an ADR clause depends on the circumstances. The risks and benefits of an ADR clause should be discussed with a competent attorney. ADR can be used to avoid the court system all together, but it has certain consequences as well.
There are other issues that should be addressed in your contracts, more than can be discussed in this simple article. You should have your attorney review all of your standard contracts at least once a year to make sure your rights are being protected. Next time we will discuss employee practices and procedures.