It’s probably not too far of a reach to say that most San Diego business owners would prefer closing their deals over a hand shake rather than involve their attorneys in another contract negotiation. Attorney fees alone are enough to convince even the most seasoned business owners to try and work out an agreement informally. Yet, all San Diego business owners understand the importance of memorializing their agreements. The business climate is dynamic requiring contract drafters to anticipate remote eventualities in order to provide the greatest protection to their clients. While most business relationships are conflict free, business owners understand that they need a well written contract that sets forth the terms of their agreements in clear and concise terms should a dispute arise.
A well written contract is enforceable (offer, acceptance, consideration, etc.), defines the rights and obligations of the parties (payment, services, warranties, indemnification, etc.), and accounts for contingencies (early termination, death of a party, natural disaster, disputes, etc.). The principles of contract formation that determine enforceability, while certainly important, will be left to another article. Specific contract terms unique to each contractual relationship are far too broad to cover in a single article. The rights, obligations and contingencies outlined in an entertainment contract, a sales contract, a service contract, a franchise agreement, a buy-sell agreement or a commercial lease differ widely. This article focuses on some common provisions found in most contracts. It is not intended as a substitution for consultation with a contract attorney. Rather, it is intended as a guide for businesses to better understand the contracts they enter into.
Attorney Fee Clauses: Most people believe that as a matter of course attorneys’ fees are recoverable if they win a law suit. Generally, however, this is not the case with contract disputes. Under California law, the contract must include an attorneys’ fee provision in order for a party to recover attorney fees in a breach of contract action. A good attorney fee clause provides for attorneys’ fees to be recovered by the prevailing party, provides that said fees are recoverable whether or not the case is tried to judgment, defines “prevailing party” and includes language for recovery of litigation costs (apart from legal fees). Look for attorney fee clauses in all of your contracts. In general, such clauses benefit all parties.
Continued in The Business Contract – Part Two.