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Contracts and Communication John G. Huisman Fleissner Davis and Johnson

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1 Contracts and Communication John G. Huisman Fleissner Davis and Johnson

2 Contracts and Communication Legal contracts are often despised for many reasons: Expensive: Too long and complicated; Language that is difficult to understand; Bad organization; _____________(Your favorite reason here) Simply not accessible! Bad contracts hinder, rather than help, the deal and relationship.

3 Contracts and Communication Legal Contracts are sometimes used for the wrong reasons or motivations: Must have something in writing; Need to be able to sue the other party; Want to play “gotcha” with obscure or “hidden” provisions;

4 Contracts and Communication Negative effects of bad contracts: Don’t know your rights and responsibilities in the deal: who is supposed to do what? Fails to effectively communicate the deal; Gotcha clauses: surprises are bad for business deals; Leads to problems with the performance that can kill the deal, or the relationship;

5 Contracts and Communication Stop thinking of the contract as something big and intimidating that lets you sue the other party if they screw up. Think of the contract as your framework document that outlines the business relationship, communicates the outstanding service you will provide on your side of the deal, and solves problems before they arise, NOT after they arise. The contract can be used as part of the negotiation, or even sales process to show your potential customer that you know what you’re doing, that you are committed to good communication and customer service, NOT winning a lawsuit.

6 Contracts and Communication Under the law, most service contracts do not need to be in writing to be enforceable. Statute of Frauds applies to contracts for: Goods over $500; Real estate contracts; surety contracts; Contracts that cannot be performed within a year; Contracts based on promise of marriage; executors; However, many intellectual property contracts must be in writing as well

7 Contracts and Communication Good contract can be especially useful for a service contract situation: Sets and communicates appropriate expectations; Clearly explains service levels to be provided; Explains, briefly, what is not being provided; Explains cost structure, and things that can change the costs involved;

8 Contracts and Communication Your contract should first communicate your core business values, commitments, and service areas; Second, it should communicate the service levels that you expect to provide, and the time-frame you expect to provide them in; Third, it should lay out how you will communicate throughout the deal to make sure that things continue smoothly, or deal with problems that might arise; Fourth, it should provide legal protections in case there is a problem that you are not able to work through;

9 Contracts and Communication Why don’t we do this? We think legal contracts have to be in complicated legalese to be binding: WRONG; We think it will be prohibitively expensive go get it drafted: WRONG; We don’t actually use the contract for anything other than to maybe sue somebody if things go south; Overly defensive lawyer drafting: thinking that it’s better to “protect” you from the world ending, than to put a good structure on a good deal to begin with;

10 Contracts and Communication For very large deals, a longer more detailed contract is often necessary. Contracts for products or goods (e.g. software) can be more complicated than service agreements. You can always have a simple framework document, with additional schedules or appendices that break up additionally needed detail into manageable sections. Often, a modest amount invested on the front-end to create a document that actually works for you can pay off with smoother dealings, and can be used readily for future situations, without significant expense.

11 Contracts and Communication This is why form contracts, that were not created for you or your situation, are usually not a great idea. They might work in terms of letting you sue somebody. They might document a few specific aspects of the deal for future reference. Form contracts will almost certainly not accurately reflect the course of your deal, and promote the communication and needed to keep the deal from falling apart. If the deal falls apart, you’ve already lost, whether you win the lawsuit or not.

12 Contracts and Communication Use your contracts to communicate your service, your value, and what you bring to the deal, and to the other side, NOT just to memorialize the deal.

13 Disclaimer: This material is not intended to provide legal advice. This material is designed to be accurate with regards to the subject matter covered. However, you should consult with an attorney for legal advice regarding any questions about a particular situation or circumstance that you may have.

14 Thank You John Huisman Phone/Text: 423-653-4380 Email:

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