Doing Business and Signing Contracts

Short Answer: Written agreements make for good relationships. Handshake agreements are ripe for misunderstanding and for a breach.

Whether you’re making deals with clients, customers, retailers, vendors, or any service provider, you should give the relationship close attention. What does that mean? If it’s a small, one-time service in which you agree to pay $100, it might not be worth preparing a contract. However, for every instance in which the potential loss (whether financial or liability-based) exceeds what it would take to prevent such a loss, it’s advisable to execute a written agreement.

Your key terms are usually going to be: (1) payment terms and (2) risk allocation (limitation of liability and indemnification). Depending on the exposure to your intellectual property (or theirs), a third key element might be confidentiality and invention assignment. 

You know how to negotiate and understand payment terms. When it comes to risk allocation, you’re probably going to require the assistance of counsel. The majority of indemnification clauses and limitation of liability clauses are objected to and oftentimes require counsel to negotiate in order to move forward.

The good news is that these agreements are quick to review and/or prepare. They won’t cost much and can often be turned around quickly.

Finally, if you’re not going to have a written contract, at least detail the agreement in an email. I once won a $140,000 case based in large part on a single email, which a judge determined to be an enforceable clarification of a contract. However, it’s not the case that all emails will be held to constitute a binding agreement so I highly recommend seeking legal assistance in preparing any substantive contract.