CONTRACTS CONNECT: Keys to Understanding Your Contracts Michelle Marzullo, Esq. [email protected] Attorney www.hwklawgroup.com HWK Law Group Meet the Speaker Michelle Marzullo • Serves as outside general counsel for small to medium size businesses. • Strives to develop cross functional working relationships with clients in diverse fields ranging from government subcontracting, tech & cyber security, health care, and service industries. • Works closely with clients to provide drafting, negotiation and advisement services for a variety of corporate transactions. • Assists with entity formation, Federal trademark and copyright protection, and employee handbooks. Contracts Basics: Offer and Acceptance Terminology: Mutual Assent – a meeting of the minds Terminology: Consideration – something given in exchange for something else, usually money given in exchange of products or services. Contracts Basics: Contract is formed when there is mutual assent between parties, supported by consideration • A simple concept that disguises a • Simple contracts are often the subject complex notion of complex court cases • Contracts can be simple or complex and range from one page to hundreds of pages Contracts can be Oral or Written • Oral • Written • The handshake agreement • Multiple types & styles • Barter • Contracts that cannot be oral: • Sales • Real Estate • Enforceable • Sale of goods over $500 • Consideration of marriage • Assuming debt of another • Any agreement that cannot be performed in less than a year What Could Possibly Go Wrong?? Most Contracts Never Get Tested • Oral Agreement • Online Templates • Cocktail Napkins If you do not understand certain words or paragraphs in your contract, then you do not understand your contract. Contracts can create a type of private law between parties • Example: “the laws of the state of • Example: “a tenant responsible to pay Texas apply.” landlord’s property taxes” • Example: “the parties waive a right to a • ______________ (seal) jury trial.” • Indemnification • Example: “parties must attempt mediation as a condition precedent to law suit” IMPORTANT: Courts largely assume that parties understand what they are signing. General Layout • Identification of parties and definitions • Background • What is being promised • Compensation • Back of contract language • Appendix/Exhibits Identification of Parties • Names • Addresses • State of incorporation/formation • Notices and points of contact Definitions • Separate section • Defined as used • Or both Defined terms are usually Capitalized, sometimes bold and/or ALL CAPS Background • Not always included • These are the whereas paragraphs • Sometimes written as an introductory paragraph Promises • The meat of the contract • Can be very simple • Can include the core aspects, representations and warranties, confidentiality, term and termination, insurance, intellectual property, remedies for breach, dispute resolution • Purpose • Term and termination changes • Points of contact/notice • Intellectual property • Confidentiality • Representations and warranties Common Clauses • Purpose • Does it accurately reflect the purpose as you understand it? • Term and termination • How long does it last? • How can you end it? • Changes • Can parties make changes? • Must they be in writing? • Intellectual Property • Is any being licensed or created under the contract? • Who owns key IP? Common Clauses (continued…) • Confidentiality • Sometimes this is in a separate agreement • Pay attention to parameters of time and personnel and topic • Representations and warranties • Often address basic presumptions about the parties or prerequisites such as good standing with the state or of person to sign Common Clauses (continued…) • Insurance • Requires that one or both parties must carry certain types of insurance • Requires proof of insurance • Requires naming other party as additional insured • Can require certain endorsements or carve-out language • Certificate of insurance is not proof of coverage • Remedies for Breach • What happens if something goes wrong • Dispute Resolution/Jurisdiction/Venue • Where do you duke it out? Back of the Contract, or “BoilerPlate”: Do not Ignore these sections! • Severability • Notices • Legal Expenses and Legal Fees • Waiver and Modification • Force Majeure • Counterparts • No assumption against the drafting party • Signature Block - Make sure the right party signs. If the contract identifies ABC, Inc. as the party, then the person signing on behalf of the entity must sign as ABC, Inc. Read the whole contract: Addendums, Riders, Exhibits, Amendments all have significance • Example: Insurance contract • The “endorsements” significantly change the contract • Example: Scope of work • Example: Authorized employees • Example: Terms and conditions Business Considerations: Tax consequences, payment terms, performance timelines • Ask for input from your advisors Common Surprises: tax implications Common Surprises: Incorporated by reference (FAR, ITAR, COMAR, OSHA) Read: Would it make sense to a stranger? A recent example… • Contract entitled, “Scope of Work for Partnership Agreement” • In the body of contract it referred to itself as “This Scope of Work #002…” • not reference a #001 and there was no separate Partnership Agreement • Also included a random paragraph about optional bookkeeping services. It did not specify who would pay, who or what triggering circumstance would determine whether to use the service Contracts cannot circumvent many laws, such as securities laws or real estate or tax laws Contracts cannot require one or both parties to do something illegal. Obvious Less Obvious • Illegality is a defense to breach of • Trespass contract • Misrepresentation • Murder • Theft • Slavery • Sales of illegal items or substances “Against public policy” is a defense. Example: Employment non-compete Agreement disallowing similar work in 100 mile radius or for 10 years Keep notes • It can be a defense to show you understood a contract to have certain meaning • It can be a defense to show a mistake in drafting • It can be a defense to show Fraud or Duress If you are running the show, you need to know • It is not a defense to say “My Partner told me he had a lawyer look at it” • It is not a defense to say “My partner told me there is an escape clause” • It is not a defense to say “My partner told me rent is not due until August” Michelle Marzullo, Esq. [email protected] Attorney www.hwklawgroup.com HWK Law Group Remember to Complete the Speaker Survey Supportingstrategies.com/bootcamp ‘click’ event name scroll to agenda select your speaker Thank You! .