Don’t Sign a Contract without Understanding What You’re Agreeing To

Contracts are a fact of life for a small business owner.  Employment agreements, vendor contracts and even the lease for your storefront or office are all contracts.  It is vitally important to understand all the different provisions found in these agreements, but I frequently hear clients state that they sign contracts without understanding or even reading them because “it’s all just boilerplate.”  In other words, since all contracts contain those provisions, they can’t be changed, so why bother to understand all the terms?

Those impossible to understand legal terms are the ones that will get you into the most legal trouble.  Not understanding what you are signing may lead to very expensive lawsuits and settlements.

Guest blogger Jonathan Ezor has started a series over at BusinessWeek.com entitled Demystifying Legalese in Contracts.  This week he gives a clear, concise explanation of the choice of law and forum clause.  As he explains, the choice of law clause tells the small business owner which state’s laws will be used to interpret the contract.  The forum clause tells you in which state your dispute will be heard.  In other words, you might be forced to defend a lawsuit in a state different than the one your business is located in.

Once you understand what you are agreeing to, you or your small business attorney can negotiate more favorable terms.  Don’t assume that just because the contract is on a standard or pre-printed form that it cannot be negotiated.  Once you understand what you are signing, you will know how to reach the best agreement for both parties.

7 Things Your Small Business Lawyer Can Do For You

Small business lawyers:

  1. Assist clients in deciding which entity is right for their small business by describing the benefits and liabilities of each type of entity (corporations, limited liability companies, partnerships);
  2. Research the availability of the business name you’ve chosen, and follow New York’s rules regarding business names. Additionally, a trademark search should be conducted to ensure you’re not infringing on another company’s trademarked name;
  3. Purchase and sell businesses;
  4. Plan for succession and exit strategies;
  5. Incorporate strategies into the original business plan to avoid conflicts between business associates, using shareholder, partnership or buy/sell agreements;
  6. Negotiate and review contracts and leases; and
  7. Advise businesses as to copyright, trademark and other intellectual property matters.

Each of these topics will be discussed at length in future blog posts. Many business owners only contact an attorney once a problem has already occurred. The right lawyer will help you avoid risk and protect your business from the beginning, leaving you to run and grow your small business. If you have any questions about any of these issues, you should contact an attorney who focuses on small business law.

Almost everything you do in your small business will have a legal implication. Establishing and maintaining a good relationship with a lawyer is sound business practice. A good choice for a small business lawyer is one who owns and runs their own small business as I do with my legal practice. As the owner of my own small business on Long Island, I understand the issues your business is faced with daily in New York.