How We Help Clients Evaluate Contractual Lanuage in the Context of Their Businesses

Most often, when a transaction crosses the finish line we refer to as the “closing” it is because of two separate but related dynamics. First, the principals have developed a “we’re in this together” kind of rapport which can generate an almost seductive aura of trust and camaraderie. Second, the principals tend to circle the wagons around the transaction’s “business terms,” commonly understood as the essential terms such as price, terms of payment and other provisions the principals deem important. They view most other terms as “boilerplate,” i.e., standardized contractual language, or even if not strictly “boilerplate” as superfluous, unimportant, relating to remote possibilities or “make work” for lawyers.

In a future dispute language the entrepreneur once read so casually and everything else in the legal documents will be carefully read by attorneys seeking to support their client’s position. The trusting rapport the entrepreneur once thought would head-off any future conflict will be forgotten or recalled as deceptive.

Such disputes do develop, even between ethical, well-intended people. A pre-closing dispute can set a transaction back to square one, or even worse, damage it irreparably often with attendant litigation. If the dispute erupts after closing, the stakes are even higher because commitments have been made and money has been spent in reliance on the agreement. In either instance, it is likely that valuable resources will have been expended and invaluable business relationships will have been shattered.

We understand entrepreneurs want to spend their valuable time on their businesses, not wading through legal language. We also know, however, that if things don’t go as anticipated, the words on the paper will be what matters most.

Here are some of the ways in which we help clients evaluate contractual language in the context of their businesses:

  • We draft, review and negotiate documents in the context of the client’s business goals. For example, when representing the buyer of a distributorship for a particular product within a certain territory, we will place great emphasis on ensuring that the license from the manufacturer will be transferred;
  • We focus on points that have economic impact. Thus, the clause in a mortgage requiring the borrower to pay all insurance premiums in one annual payment will have greater impact on the owner of multiple properties than to the owner of a single property;
  • We review documents prepared other parties’ counsel knowing that the language will be favor his client. For example, a bank-prepared document may allow the bank to call a default immediately upon non-payment. The entrepreneur skims through that language because he doesn’t intend to default and assumes that the bank would extend the courtesy of notice before calling a default -- that is, until a credit crisis turns helpful and trusting bankers into hyper-vigilantes;
  • We are tenacious advocates. We understand that it is not our function to make our clients’ business decisions. If, however, we believe that business pressures are distracting our client from focusing on a particular legal provision, we will persist until the client has made an informed decision. We far prefer our client’s momentary impatience to a subsequent conversation that includes the phrase “we told you so.”

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We understand entrepreneurs want to spend their valuable time on their businesses, not wading through legal language. We also know, however, that if things don’t go as anticipated, the words on the paper will be what matters most.