Strong Contracts for Strong Businesses: 5 Clauses You Should Have in Every Contract

A well-drafted, legally binding contract at the outset of any transaction is paramount to protecting your business from risks and liabilities. Contracts are essentially your sword and shield when it comes to people and entities that want to sue you—or that you want to sue. As a business, you have a very real target on your back.

Perhaps one of the most egregious (and, unfortunately, common) mistakes we have seen business owners make is to draft up their own contracts either on their own or through free DIY templates online. The problem with this approach is that it doesn’t take into account contract law nuances that may exist in your state, it’s not necessarily tailored to your situation, and it’s just overall a bad idea to try and replace an experienced lawyer’s guidance with something you find on the internet. The dollars you save not hiring a lawyer could be a minuscule percentage compared to what you will have to pay if a contract dispute goes to court.

Consider this: Contract disputes make up roughly 60% of about 20 million cases filed each year.

Going to court over a contract dispute can—and does—get very expensive. As such, if you haven’t gotten your contracts reviewed by an experienced business attorney, you’ll want to do so as soon as possible. We at R|A Law work hard to ensure that your existing contracts are as strong as they can be, and we can draft new ones for you so as to minimize your exposure to risks. We have helped fortify many businesses’ contracts, and would be more than happy to help you with yours.

With that said, we want to review with you the five most essential clauses you should have in every contract you sign.

Attorney’s Fees

There should always be a clause explaining which party pays the attorney’s fees in the event of a contract dispute, along with the associated court fees. In Florida, the other party does NOT have to pay your attorney’s fees if you prevail. This is called the American Rule, and is used by the state of Florida as well as the majority of states and jurisdictions in the U.S.

The American Rule states that attorney’s fees can only be awarded if it is stated in the contract that the losing party has to do so, or if it is authorized by statute. Having this clause can therefore act as a deterrent for frivolous or meritless lawsuits against your business, as most people think twice about suing someone if they know beforehand that if they lose the lawsuit they also stand at a substantial risk of having to pay back the prevailing party’s attorneys’ fees and costs.

Jurisdiction, Forum, and Choice of Law

Every contract should expressly state which state laws a dispute would be litigated under should it ever come to that. This is important because one state may be significantly more sympathetic towards businesses or vice versa. Essentially, choosing your jurisdiction allows you to have control over potential lawsuits that could come your way, especially if you have many out-of-state customers or clients. You will want to specify exactly where you want the venue to be and which state’s laws will apply to your dispute. A good choice of law and venue clause can also act as a deterrent to lawsuits if out-of-state customers or clients know they can’t sue your business in their hometown but rather are forced to litigate their dispute in your backyard.  The good news is that a good business lawyer knows exactly where sympathetic juries are more likely to be, and they can help you understand where it’s best to set as your venue.

Waiver and Severability

The waiver allows the parties to forego their right to sue for a breach of a provision in the contract without giving up their right to potential future claims. Severability, on the other hand, allows the court to take out any invalid provisions while keeping the rest of the contract in place. Severability allows a court or judge to essentially “strike out” any parts of the contract that may be unconscionable, illusory, or unlawful while holding that the rest of the contract can stand on its own.This is important to have in your contracts because it prevents an otherwise good contract that protects your interests from being thrown out when you need it the most.

Integration

You obviously want to prevent other parties from modifying a contract that both parties had previously agreed on. Having an integration clause essentially means that both parties acknowledge that the written and signed contract in front of them was the final agreement. Usually this part also states that if any changes need to be made in the future, both parties have to be in on the change and it must be written.

Notices

Just as with setting forth which state’s laws apply and where the parties’ dispute should be litigated, every contract should expressly state the manner and form of notifications between the parties.  Usually, most contracts will contain clauses that may require one party to give notice to another.  The pertinent question then becomes: does the notice need to be in writing to be effective and how must it be delivered to the other party?  For example, is a phone call sufficient to provide formal notice to the other party?  Will a text message suffice?  How about an email or social media post?  Should the notice be directed to a particular individual or department?  These are all important questions which should be clearly answered by the contract’s notice provision.  Otherwise, critically important rights can be lost by failing to properly follow a contract’s notice provision.

A Business Attorney That Cares About You and Your Business

R|A Law is ready to review and draft contracts for you and your business. Whether you are a small local business or a Fortune 500 company, we have the experience with Florida contract laws that you need.

The five clauses above are just a small part of the entire contract, and there are many more parts that you should be including in every single one you draft or sign depending on your business needs. Let us help. Call us today at our Palm Beach “Satellite” Office at (561) 953-9630, or our Treasure Coast Office at (772) 261-5080. We are ready to serve you!