5 Tips for Great Business Contracts

Small and midsized businesses are often anxious about legal risks, and need affordable solutions. Strong contracts are key to avoiding unnecessary, costly disputes, and solidifying relationships with customers and vendors. Here are five tips for great deals.

1. One and Done: It’s often a good idea to create a “master services agreement” that explains all of the legal terms that govern your relationships. That contract may be “evergreen”, and last indefinitely. Work orders are a great way to update business focused issues like ongoing deliverables and deadlines without re-opening the full contract.

2. The Price is Right: A key reason to enter a contract is to ensure that you and your customer or vendor have agreed upon the scope of work, pricing and payment terms. Clarity about those issues helps avoid disputes.

3. Protect Your Assets: Intellectual property like trademarks, copyrights, software code, inventions, and trade secrets (such as customer lists and profit margins) all provide competitive advantage. Be clear about what’s yours, as distinct from what belongs to your customers and vendors. And agree that everyone will keep confidential information a secret.

4. Hold Me Harmless: “Indemnifications” help protect your business from the cost of risks that you didn’t create. If you’re sued without merit, it’s good to have a “hold harmless” provision that limits your defense expenses.

5. Fight on Your Home Turf: Good contracts help limit the risks of disputes and litigation. But, if there must be a legal fight, you may want to ensure that Georgia law will govern, and to limit costs, require that local courts hear the case.

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This article was also published in the March 2016 issue of the Gwinnett Citizen newspaper.

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JoAnn Holmes ("Jo") is the founder of HOLMES@LAW, LLC. She serves as Outside General Counsel to select, intimate management teams for midsize companies. Likewise, Jo provides strategic support for lean law departments.

Jo founded HOLMES@LAW to provide agile, result-driven legal solutions. Beyond risk management, we help identify opportunities. The firm's focus areas are business law and strategy, commercial contracts and global intellectual property management. We build long-term relationships as trusted collaborators, and our flexibility consistently yields great value for clients.

HOLMES@LAW is also committed to service work, including through supporting local schools and leadership groups, as well as domestic and international charities. Since its founding, the firm has dedicated more than 200 hours to community service.

Contact Us to discuss how we can work together for your business success. HOLMES@LAW - Your Business Ally™.

Holmes, How … about the Disclaimers?

Information shared by JoAnn Holmes and/or HOLMES@LAW, LLC ("We or Us") is for educational purposes only. It is not legal advice. Each situation is unique, so the information We share may not be relevant to your circumstance. Until you enter a formal engagement agreement with Us, We are not your legal counsel, and no attorney-client relationship exists. So, please do not share any confidential information with Us, and please only interact with Us if you agree to these ground rules. Thanks!

© 2016 HOLMES@LAW, LLC. All Rights Reserved.

#contracts #indemnification #tradesecrets

Holmes, How … Do I Negotiate a Broker Representation Agreement?

A strong sales program is central to the success of most businesses. However, even an accomplished sales team may be augmented by a broker with a specific set of skills, contacts, and/or licenses. When engaging a broker, be careful to precisely define the relationship, its scope, term, and compensation structure to ensure that you receive the desired value. Let’s get started.

1. All in? One of the first considerations in working with a broker is the scope of representation. Are they deputized to sell all of your products and/or services, or just some? Do they have representation rights in a limited geographic region, or may they sell everywhere? Will you work with this broker exclusively, or have other sales representatives? Unless you have a strong knowledge of the broker’s abilities, it may be wise to grant a “test” field of representation, so that you can evaluate their abilities before granting broad-scope exclusivity. Moreover, even when granting a broker certain exclusivities, you may want to retain the right to make your own direct sales that were not generated by the broker, without a fee obligation. And, for assurance in the event that things don't work out, include a finite term for the agreement so that there’s a chance for everyone to reevaluate the value of the relationship. That term will vary depending upon what's a reasonable timeframe to generate target sales in your industry.

2. Employee, Agent or Neither? Typically, the business goal is to treat a broker as an independent contractor, rather than an employee. The IRS offers guidance on this, which you can review here. For greater clarification, the independent contractor relationship can be reinforced with explicit contract language indicating that the broker is not your employee, and as such, you will neither assume the privileges, nor the responsibilities, of an employer. So for example, you will not provide the broker with health insurance benefits, nor will you withhold taxes that are due to governmental agencies for employees. Similarly, your agreement may clarify that you will not control the broker’s activities in the same way that you may for an employee. For instance, you do not set the broker’s hours or provide them with transportation for sales calls. Likewise, it’s prudent to clarify in your agreement that the broker is not your agent, and therefore cannot bind you to any contract with a third party, such as a customer. That way, you maintain control over the terms of your agreements and product/service commitments.

3. What Will it Cost? Set the broker’s compensation structure up front. Will they be paid a flat fee per order, or a commission based upon a percentage of sales revenue? What if a customer receives discounts or makes returns? Is that deducted from the broker’s commission calculation? When is the broker’s fee due – before or after the customer’s payment? (On a related note, who handles disputes with customers if they don’t timely pay for their orders? If the broker has the customer relationship, you may want their help with a resolution.) Be aware that brokers may request an audit right to ensure that they are being paid appropriately. This is often a reasonable request, although there may be some negotiation as to who bears that audit cost.

Clarifying the scope of representation, independent contractor relationship and commission structures will help avoid disputes with your broker in the future. In addition, be mindful that your broker may learn important information about your business that provides a competitive advantage, such as pricing and profitability margins, customer lists, financial targets and/or expansion plans. All of these may be trade secrets, which should be protected through confidentiality and non-disclosure agreements. Likewise, you may wish to include non-solicitation terms in your contract to discourage the broker from enlisting your employees to enjoy greener grass outside of your pastures.

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______________

JoAnn Holmes ("Jo") is the founder of HOLMES@LAW, LLC. She serves as Outside General Counsel to select, intimate management teams for midsize companies. Likewise, Jo provides strategic support for lean law departments.

Jo founded HOLMES@LAW to provide agile, result-driven legal solutions. Beyond risk management, we help identify opportunities. The firm's focus areas are business law and strategy, commercial contracts and global intellectual property management. We build long-term relationships as trusted collaborators, and our flexibility consistently yields great value for clients.

HOLMES@LAW is also committed to service work, including through supporting local schools and leadership groups, as well as domestic and international charities. Since its founding, the firm has dedicated more than 200 hours to community service.

Contact Us to discuss how we can work together for your business success. HOLMES@LAW - Your Business Ally™.

Holmes, How … about the Disclaimers?

Information shared by JoAnn Holmes and/or HOLMES@LAW, LLC ("We or Us") is for educational purposes only. It is not legal advice. Each situation is unique, so the information We share may not be relevant to your circumstance. Until you enter a formal engagement agreement with Us, We are not your legal counsel, and no attorney-client relationship exists. So, please do not share any confidential information with Us, and please only interact with Us if you agree to these ground rules. Thanks!

© 2016 HOLMES@LAW, LLC. All Rights Reserved.

#brokeragreement #independentcontractor #exclusivity #commission #confidentiality

Holmes, How … Do I Resolve Customer Complaints and Minimize Legal Liability?

Customer complaints are a reality of doing business. When they arise, is an apology sufficient? If not, what’s an appropriate settlement amount, and when should you obtain a release? Having a pragmatic plan to address grievances can help retain your valued customers and mitigate the risk of disruptive legal disputes. Let’s get started.

1. Are you Listening? – Often customers simply want to be heard. The only cost is your time and empathy. However, be mindful that “I Hear You” is different from “Mea Culpa”. To your customer, the former is likely disarming. As an attorney, the latter is potentially alarming, because admission of wrongdoing could be used against you in a legal dispute. A reasonable alternative is to genuinely apologize for a customer’s dissatisfaction with your product or service, while not specifically agreeing to any fault. This is especially important if you’ve not yet had an opportunity to fully investigate the matter.

2. Get it in Writing – If acknowledgment of a customer’s concern is insufficient appeasement, take the lead to evaluate an appropriate resolution. Do you have a form (whether physical or digital) ready to collect the patron’s narrative? If you maintain a customer care department, your representatives may document the initial complaint. Then, follow up to request the customer’s written complaint, along with any relevant evidence such as photos of damage, receipts, medical bills, etc. Provide guidance for the information that will help you evaluate their claim. While some may balk at the necessity to follow this process, others could be pleased that you have a means for fair assessment of criticism. Completing your written form provides the customer an important opportunity to think in detail about what happened. Likewise, it provides you, as the business owner, with the relevant facts and dates to take measure of the complaint. Did the customer follow the product’s label instructions? Is their expectation within the scope of your service contract? Do you need any further information to reach a sound conclusion?

3. Release Me! – Once you have evaluated the customer’s statement and related materials, it’s time to assess an appropriate resolution. If denying the claim, briefly explain your basis in writing. However, if the claim is merited, or you simply make a business decision that settlement is more pragmatic and cost effective than potentially defending a lawsuit, then before issuing any recompense, be sure to obtain a written release from liability. This release should be sufficiently broad to cover any ancillary complaints related to the grievance. The necessary release language may vary by state, so it’s good practice to check with local counsel to ensure that your document is enforceable.

4. Make an Offer They Shouldn’t Refuse – Ground rules – no horse head deliveries to your customer’s bed (my Godfather fans will get that one!). But, how much compensation should you offer in exchange for a release? Again, having receipts and invoices for the asserted damage is helpful because it provides a basis for evaluating your customer’s actual out of pocket costs. Also consider the potential expense for defending litigation. This includes not only attorney’s fees and court costs, but also the expense of distraction from your core business and the redirection of resources to address discovery and deposition demands. (Real litigation is very different from TV series litigation!) Further, consider the potential damage to your brand on social media. A single bad Yelp review can have protracted effect on your business reputation. Likewise, potential investors and business partners may monitor your professional standing in determining whether to conduct business with you. Ultimately, the value of a settlement and release is a commercial decision that will include consideration of multiple variables. Whether offering a product/service replacement or cash, it may be wise to leave some room for negotiation in the event that your first offer is not acceptable to the customer.

Finally, if a consistent pattern of customer complaints develops, there’s an opportunity to adapt and improve. That said, if you don’t use the knowledge from your customers for that purpose, the documented history of customer complaints could become litigation fodder. Word to the wise - if a customer’s attorney contacts you, it’s a good idea to retain your own counsel early enough to help navigate the dispute, and avert mistakes with your defense. An ounce of prevention? Well-drafted contracts can help avoid disputes by clearly explaining everyone’s expectations up front. Informed customers are hopefully happy ones.

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We'll send you the good stuff right to your inbox!

______________

JoAnn Holmes ("Jo") is the founder of HOLMES@LAW, LLC. She serves as Outside General Counsel to select, intimate management teams for midsize companies. Likewise, Jo provides strategic support for lean law departments.

Jo founded HOLMES@LAW to provide agile, result-driven legal solutions. Beyond risk management, we help identify opportunities. The firm's focus areas are business law and strategy, commercial contracts and global intellectual property management. We build long-term relationships as trusted collaborators, and our flexibility consistently yields great value for clients.

HOLMES@LAW is also committed to service work, including through supporting local schools and leadership groups, as well as domestic and international charities. Since its founding, the firm has dedicated more than 200 hours to community service.

Contact Us to discuss how we can work together for your business success. HOLMES@LAW - Your Business Ally™.

Holmes, How … about the Disclaimers?

Information shared by JoAnn Holmes and/or HOLMES@LAW, LLC ("We or Us") is for educational purposes only. It is not legal advice. Each situation is unique, so the information We share may not be relevant to your circumstance. Until you enter a formal engagement agreement with Us, We are not your legal counsel, and no attorney-client relationship exists. So, please do not share any confidential information with Us, and please only interact with Us if you agree to these ground rules. Thanks!

© 2015 HOLMES@LAW, LLC. All Rights Reserved.

#release #customercomplaints #settlement #businessreputation