When the Miss America Pageant was slapped with a three million dollar lawsuit for disqualifying women who were "too old" to hold the title, the company was faced with a dilemma that is common for many businesses: a contract dispute.
The contract clearly said contestants had to be "17-24", but did it mean that a woman qualified until her 24th birthday or throughout her 24th year? While it might seem like a silly question, it's a question that could cost a company millions of dollars.
Contract disputes can be messy, time-consuming and expensive. You can avoid them by using extremely clear language in your contract and by implementing the following strategies.
Account for Future Variables
Living in the now might be great for piece of mind, but when it comes to avoiding contract disputes it's important to account for the fact that the future is inevitable. Asking yourself a series of questions about the future can be helpful. Will the contract renew automatically or be renegotiated every year or two? Are there any circumstances that could possibly make the contract void in the future? What happens if one of the parties goes out of business or dies?
If you want to make sure that a clause (like a non-compete) survives past the terms of the contract, make sure to put in a survival clause and notify the signee of the special circumstances.
Conversations about contracts can be challenging, especially when you have to include stringent terms in order to protect your business. However, talking about contracts in terms of the future can help prospective clients and employees see that you're planning to be around in the years to come.
Get All Contracts Notarized
While notarizing a document doesn't make it inherently legal (i.e. your notarized contract to employ someone for a dog fighting ring would not hold up in court), it does make sure that the contract is legally enforceable. Most people only notarize documents when they absolutely have to, but a notarized contract has two important benefits:
1. Signees are probably more likely to thoroughly read (and less likely to
dispute) a contract that will be officially notarized.
2. If a court case is inevitable, signees will be unable to claim that they
never signed the document.
According to Clay Mason, CEO of Superior Notary Services "Getting a document notarized can admittedly be a hassle, but services like ours come to you, so you don't have to leave the office or stand in line with a new client."
The National Notary Association has helped more applicants become notaries than any other provider since 1957 and offers a comprehensive and detailed code of ethical and professional conduct for American Notaries in their Notary Public Code of Professional Responsibility PDF.
"The Code addresses common problems, issues and questions encountered by today's Notaries by prescribing principles, standards and rules and applying them in helpful specific examples."
Trust, But Verify, Counterparties' Ability to Sign
Arkady Bukh, the partner at Bukh Law Firm, recommends to ascertain the counterparty's legal standing regarding their ability to sign the contract. If, through using fraudulent identification, they are not who they claim to be, the contract will be null and void and unenforceable, but that won't keep you from being fleeced.
It is vital to know that the counterparty to a contract are who they say they are and is empowered to sign. A key element of overcoming this hazard is by efficient due diligence. It enables a company to evaluate the legal and professional abilities of a counterparty, and identify any anxieties or 'red flags', before beginning a contractual relationship.
Neglecting to exercise proper due diligence, in yielding to other commercial preferences, would be a blunder. The counterparty, at least, should be obliged to present information about legal abilities to sign. If a proposed counterparty declines to provide information, is insulted by such a call, or is unwilling to satisfy the terms of the company, then this in itself would establish a red flag.
It is vital that due diligence does not only comprise a box that is ticked at the outset and then put away; it should be constantly watched and evaluated. In doing this, a company is more apt to assure that the counterparty acts in a manner compatible with the company's anti-corruption policy, and thereby decrease its ongoing risk.
Account for All Budgets and Cost Before Beginning a Project
This might seem like an obvious strategy for avoiding contract disputes, but cost and payment disputes are a major reason that businesses end up in court. Luckily, they are easily avoidable.
It's easy to get enthusiastic and jump right into a project after all of the hand shaking is done. However, if you haven't finalized all of your budgets or negotiated who would be responsible for specific costs, it's time to hold back until the paperwork is complete.
For instance, if you're employing a sales person to knock on doors and drum up new business. Who's paying for gas? Are you providing a vehicle? Also, you mentioned that bonus in the interview. Is it included in the contract? When is salary up for review? Is there a trial period of lower pay?
While unexpected costs can arise, do the best that you can to account for all known variables and make sure that the signee is clear about compensation and costs.