Practical business owners watch out for “killer contract clauses” that can instantly turn an otherwise fair agreement into a nightmare for their business. Some examples include:
“Evergreen” clauses allow the contract to be automatically renewed forever unless one or both parties send a notice to cancel during a certain time window. Example: This agreement will automatically renew for another 10-year term unless the buyer delivers notice of cancelation no earlier than two days prior to the date of the ending of the existing term.
Limitations of remedies and damages can be tough for a practical business owner to detect, but they can be very deadly to your business, as they expressly limit the other party’s liability for causing damage to your business. Example: The seller’s sole and exclusive remedy for any breach of this agreement is a return of the amount paid to the buyer or $150, whichever is less.
Exclusive jurisdiction and venue may limit you to a specific court or a specific state to file suit. Example (if the other business is from Alaska): The parties agree that any and all actions in regard to this agreement must be brought exclusively in the Nome division of the Alaska federal district court, which shall have sole and exclusive jurisdiction.
One-sided attorney’s fees. Practical business owners often want a “loser pays” attorney’s fees clause so they may be able to recover their own attorney’s fees if they have to go to court. However, agreements can contain one-sided attorney’s fees clauses. Example: Seller agrees that it will pay Buyer’s attorney’s fees if Seller is required to retain legal counsel to enforce this agreement, whether or not litigation is commenced.
Chris Kelleher (Kelleher@TheLawFirmForBusinesses.com) is the founder and president of The Law Firm For Businesses PC.