Continuing with our start-up series, your Baltimore Small Business lawyer wants to discuss the single most important topic that will cause the most legal mistakes for a small business owner, Contracts. If you want to review our previous post, check out the startup checklist here. For now, here is our simple primer on Contracts:
Baltimore Small Business Lawyer: Contracts the 1000 foot view
On a very basic level, a contract is a legally enforceable agreement that involves an offer (for goods, services, or anything of value, e.g. “I will sell my car”), acceptance (“yes, I’ll buy that car”) and consideration (a murky legal term that is coined for whatever you are giving up for the deal, usually money or time). Contracts do not necessarily need to be in writing. However, over the course of time, certain contracts must be in writing to be considered valid, such as any contract for goods over $500, contracts for land, etc. Our advice is to always get it in writing. The writing does not need to be complicated, it can be as simple as a bill of lading or a receipt or invoice. By exchanging the money, you are agreeing to accept the terms listed on the contract.
Baltimore Small Business lawyer: Common small business contracts
Here are some common contracts you may encounter as you are starting a small business and some common pitfalls:
- Commercial Lease agreement: Every business needs a home. Common pitfall: this is a contract and it does not have any of the protections of the LL/T article. It is a contract and under the eyes of the law it is between equals. If it isn’t in the contract, it’s not part of the deal.
- Vendor Contracts: If you need something to run your business, you’re going to have vendors (sometimes called suppliers). You may have a contract in place with them. Read it. Understand what rights you have if the vendor screws up your order. Negotiate it if you can, and understand that you may need to find a new vendor.
- Customer Contracts: Receipts, return policies, and bills of lading are all contracts. Be sure you have all the necessary terms and conditions printed or visible to make the deal work!
- Independent Contractor contracts: Many clients use contractor labor when first starting out. Be sure you use an agreement that properly spells out the terms and conditions of the person’s work conditions and terms and does not create an employee/employer relationship.
- Employee Policy Handbooks: While not a contract, this should spell out how your workplace should run and can later be used to defend workplace violations in court. Many small businesses don’t have one but shouldn’t overlook this important legal “contract” that isn’t a contract.
Baltimore Small Business lawyer: important terms
Here are some important terms to understand and be aware of:
- Integration is the concept that a document is complete and all prior discussions, wordings, and negotiations are dead and the only thing that controls is the actual contract itself. If it’s not in there, it doesn’t count.
- Severability is the idea under the common law, if one part of the contract is legally invalid, the whole contract is invalid. You want a judge who may later be considering the validity of the contract to be able to sever an invalid part and keep the rest of the deal together.
- Waiver could mean a few things, that somewhere in the fine print of the contract you are waiving your rights to a jury trial, trial in your home jurisdiction, trial in any court system (binding arbitration), etc. Sometimes these are negotiable provisions, sometimes not.
Baltimore Small Business lawyer: Bottom Line
Contracts are a huge part of every small business owner’s daily life. While some can be negotiated without the use of a lawyer, our firm often constructs agreements for clients and/or reviews contracts on a flat fee basis or for a nominal fee. Our goal is always to make contracts simple, readable, and user friendly. All of our contracts will be provided in word format for later editing by the client. We will also use A small fee up front can save thousands in litigation costs if a contract goes bad. Bottom line: Call ENlawyers if you have a question about a small business contract!