“Know when to hold them
Know when to fold them
Know when to walk away
Know when to run”
“The Gambler”
When an entrepreneur enters into a contract with a larger entity, they are often presented with a contract that seems one-sided. Sometimes the entrepreneur feels they have to give in to what the other party wants – but the provisions listed below should usually be considered “deal breakers.” As Kenny would say, you need to know when to walk away, and when to run.
Where Am I?
Avoid “venue selection” or “forum selection” clauses that require that any disagreement be resolved only in a far-off location such as a different state. Signing a contract with this provision can effectively discourage or even prevent you from pursuing your legal remedies if it’s too expensive to appear in the selected jurisdiction, and at a minimum they put you at a tremendous disadvantage. Worse, they subject you to being sued in a jurisdiction where you have to contact.
Arbitrary Arbitration
Standard form contracts often have arbitration agreements that require the use of a high-cost provider such as AAA can be deadly. Such arbitration can be just as time consuming and expensive as litigation, but even more so in that you are required to pay thousands in arbitration fees regardless of the outcome.
I’m Paying for What?
Review your agreement for one-way provisions, which require you to maintain confidentiality, pay attorney’s fees, etc., but do not require the same of the other side. These should almost always be changed or avoided.
“Trust Me”
Very often an entrepreneur believes that certain promises will be considered part of the contract because the parties always talked about them – and even put them in writing such as emails. But if those provisions are not actually in the contract, they probably are not going to be enforceable. Make sure that everything you are expecting is in writing.
Rent without premises
In commercial leases, the lease document frequently requires the tenant to start paying rent – but does not set any deadline for the premises to be ready to occupy.
When hiring an attorney to review your contract, look for one that is familiar when these problem provisions and can best advise you on how to avoid going to court while protecting your interests.
If you would like more information on contracts, check out our podcast on this topic. Before you sign on the dotted line, know your rights and schedule your contract review with us here.
Sam Ventola has a wide variety of experience in business litigation, legal education, and business mediation. When he is not protecting his clients through thorough contract reviews, he enjoys volunteering in the community and spending time with his family, especially his grandson, Jack.
Ventola Law serves the Denver Metro area including Arvada, Aurora, Boulder, Brighton, Commerce City, Castle Rock, Golden, Lakewood, Littleton and Arapahoe, Adams, Douglas and Jefferson Counties.