planning tips- Business & Commercial
Our litigation experience has shown that many commercial and business disputes can be avoided by careful planning and documentation during the initial stages of a commercial or business undertaking (including contracts), or at the time it undergoes significant change. We have seen disputes arise amongst long-standing friends and business associates when deals fall apart or businesses change. Poor planning can lead to expensive losses and years of litigation.
While Jacobs & Barney does not handle the formation of businesses or the initial drafting of commercial contracts, we frequently handle business relationships and transactions that have gone awry. We would be pleased to provide a referral if your issue is not one that we would handle.
Planning tips to help minimize the risk of commercial and business disputes during the initial stages of a commercial or business undertaking or at the time a business or other type of undertaking undergoes significant change:
Read through those materials to educate yourself as to potential concerns. Discuss those matters with an attorney to help you figure out how laws apply to and impact your particular business and commercial concerns.
Determine whether the business you are transacting with is in good standing. Generally speaking, a business that is forfeit cannot lawfully enforce contracts or file suit unless or until it is brought into good standing. Even when reinstated to good standing, the timing of the forfeiture and reinstatement of a business to good standing can have a significant impact on a dispute.
Determine whether the business and the professionals with whom you are doing business are properly licensed. Ensure that required licenses are maintained and that involved licensees are in good standing. Review disciplinary complaints and actions against individual licensed professionals as appropriate.
Ensure that the rights and interests of business owners and members are clearly defined in a written documentation vis-a-vis the other business owners and members (i.e., bylaws, operating agreements, resolutions, partnership agreements, etc.)
Develop policies and procedures to regularly and routinely audit and review financial information, including, for example, bank records, cash transactions, digital accounting records, ledgers, receipts, deposits and vendor accounts.
Ensure that the confidential and proprietary information of the business is clearly identified and protected from misuse and disclosure by means of agreements with members, partners, officers, co-owners, employees, agents, vendors, internet service providers and others as may be appropriate.
Work with your internet or computer services provider to ensure that business records, communications and passwords are secure; and that employees cannot lock the employer out of business accounts or alter those accounts.
Develop and/or understand procedures and policies regarding the appropriate and acceptable use of business-provided phones, email accounts, computers, social media accounts, etc. Ensure that communications made by or on behalf of the business are preserved electronically and, if appropriate, by printed documentation.
Review and update insurance policies and coverage. The Maryland Insurance Administration publishes “A Business Owner's Guide to Commercial Insurance”.
Planning tips to help minimize the risk of commercial and business disputes during the initial stages of contract negotiations:
When entering into contracts yourself or by or on behalf of a business, read and understand all of the terms of a contract before signing it. For example:
Does it correctly state with the required specificity, the undertakings and responsibilities of the parties?
Does it have an attorneys fee or legal expense provision?
Does it provide for mandatory or voluntary mediation or arbitration?
Does it have a mandatory jurisdiction and venue provision? And if so, are you willing to submit any disputes to the identified jurisdiction and venue which in many cases, may be another state?
What is the recourse in the event of a breach of a contract (a/k/a events of default) including, for example, definitions of events of default; possible remedies and limitations on remedies (i.e., damages, liquidated damages, damage waivers, damage caps, indemnity, attorneys fee provisions, deposit forfeitures and refunds, specific performance, jury trials, counterclaims, etc.)?
What are the deadlines and procedures to be followed in the event of a breach?
Know who you are dealing with and identify the correct legal names of the parties to the contract so that you know the full identity and the interests of the person against whom recourse may later be sought if the transaction goes awry. The persons signing a contract on behalf of a business must be authorized to do so. Investigate the bona fides and standing of the businesses. Particularly for small or undercapitalized businesses, as appropriate, get personal guarantees from the owners or principals.
Once you are certain that you are agreeable to all of the terms of a proposed contract, make sure that all of the required signatures, initials and dates are on the document where required and that they are legible. Otherwise, you may find that you do not have a contract when you thought you did; or that certain terms had been agreed upon because they were not correctly stated.
The above are just some examples of ways in which you might protect yourself. An attorney will be able to advise you as to additional methods and how best to accomplish your objectives.
If a business dispute arises or seems imminent or if you have other questions, consult a dispute resolution firm such as Jacobs & Barney to evaluate your case, advise you as to its strengths and weaknesses, assist you in your decision-making processes to resolve the dispute and work towards a satisfactory and cost-effective resolution to your problem.