Why Fine Print Matters in Commercial Contracts
When entering into a commercial contract, it can be tempting to simply jump to the meat of the agreement: How much am I paying (or getting paid), and what exactly am I paying for (or being paid to do). Every contract includes many additional provisions, however, that govern the legal relationship between the parties and affect what happens down the line, should the business relationship fall apart. Read on for a discussion of some of the important and often overlooked provisions in commercial contracts. Call a seasoned Pasadena litigation attorney with any questions or for help with your Southern California business enterprise.
Choice of Law and Venue
Many contracts include a provision that establishes how disputes will be resolved. Specifically, they will establish which state’s law will apply to the contract and may even specify where a legal dispute should be held. Choice of law may not seem important at first glance, but different states can have vastly different laws that favor different parties in litigation. Some laws may make it harder to prove fraud or may generally be favorable to certain types of parties. Moreover, you do not want to be dragged into court in a foreign, inconvenient location. Speak with a knowledgeable attorney about the choice of law provision to ensure that you are not going to wind up litigating a dispute in an unfavorable jurisdiction.
Many commercial contracts nowadays include an arbitration provision. Whether the contract is between consumers and a service provider or between a client and a contractor, many businesses are finding it advantageous to limit legal disputes to arbitration. These provisions call for the parties to essentially forfeit their rights to bring a legal dispute concerning the contract to a court and instead restrict the parties to binding arbitration to resolve disputes. While arbitration can be a cheaper and more streamlined alternative to traditional court battles, it does have drawbacks. Arbitration tends to favor the party with more power in a relationship, especially if it is a consumer vs. a corporation. Arbitration may limit available damages or other remedies, and the agreement may or may not specify how the arbitrator is to be chosen. It is vital to evaluate arbitration clauses before signing and make sure that you are satisfied arbitrating rather than litigating should things fall apart.
If you and your counterparty wind up in a dispute down the line, you will likely need to hire an attorney. Hourly billing costs, expert fees, discovery expenses, and other litigation costs and attorney fees can sometimes become nearly as pricey as the dispute itself. Some contracts include language that forces the losing party to a dispute to pay the attorney fees of the winner, depending on the circumstances. It is essential to know when signing a contract who will be responsible for legal fees and under what circumstances.
The conclusion of a contract will state that the written agreement, along with any incorporated addendums and attachments, represents the final agreement among the parties. Known as the “integration clause,” this provision ensures that the entire agreement is on paper and that no other conditions or clauses apply. That means that nothing included in the discussions leading up to the contract signing and nothing verbally discussed during or after the signing matter unless they are put in writing. Parties can get into hot water when they believe that they have an understanding based on their negotiations but then fail to realize that their view is not memorialized in the contact. Worse, the other party may have misled them into believing something was understood, even though it was not in writing. If a dispute arises down the line, you will have a tough time relying on oral assurances when the contract explicitly states that only the writing governs the business relationship.
Contact Pasadena Business Lawyer Andrew Ritholz
If you are starting a small business in California or are facing legal issues with your existing Los Angeles business, consult with an attorney who understands your rights and can protect your interests with dedication and consideration. Contact Pasadena business lawyer Andrew Ritholz at 626-844-7102.