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OPERATIONS

The Value of Being Precise

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It may seem inconvenient or expensive to put agreements with suppliers into precise contracts, butdo it anyway. Vague contracts can come back to haunt you and plunge your company into legal hassles down the road. They can also reduce thevalue of your business if you decide to sell.

One lawyer who has handled acquisitions evaluation for a large corporation says that many deals end up being killed because the acquiree had vague contracts.Even if the deal can be saved, he points out, "it costs money to clean things up," and that gets reflected in the acquirer's final valuation.

Common problems include oral agreements that have never been put in writing; lack of a termination date for arrangements; unspecified commitments toprovide services for a product; and failure to specify what happens if the contract is breached. If you think you can't afford the legal expense of drafting everyagreement, at least have a lawyer develop boilerplate contracts for you.

Last updated: Jan 1, 1995




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