Crossing Your T’s and Dotting Your I’s

Posted on March 10, 2008

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I would like to thank the Birmingham Venture Club for posting a recent article that was written by Russell and myself.  The focus of the article is on the importance of contracts in your day to day process.  The article can be found here.  I have also included the article in full below:

Crossing your T’s and dotting your I’s
Mike Goodrich II , The Goodrich Law Firm

Last I checked, businesses needed customers.  No matter how you slice
it, your company needs to sell a good or service if it wants to remain
in business.  When a business delivers its goods and services, it does
so pursuant to a contract.  Now, this contract may be quite simple –
for instance, when you order a hamburger at fast food restaurant, it
has a contract with you to deliver your hamburger.  But as the
sophistication of the delivered goods and services increase, so does
the complexity of the contract.

If the goods and services will be delivered over time, involve a
substantial amounts of money, or require non-monetary obligations, then
a written contract is essential.  In fact, Alabama law requires many
contracts to be in writing to be enforceable (including surety
obligations, contracts involving the sale of real estate and contracts
with a term over a year).  However, many oral contracts are
enforceable, so those handshake deals often count. But, with an oral
contract you face the inevitable problem that litigants will always
have different recollections as to the terms of an oral agreement.

In its most basic form, a contract will set forth your rights and
obligations as well as those of the other party (e.g., your customer or
vendor).  The importance of having rights and obligations clearly
defined in writing cannot be overstated.  Most people do not enter into
a contract with a future dispute in mind. However, this is precisely
what should be on your mind at the outset.

When drafting a contract for a client I want to be sure to include the
following key terms:  (1) A description of the good/service to be
delivered; (2) Price of the goods/services; (3) How and when payment
should be made; (4) How expenses incurred by each party will be
handled; (5) Acceptable standards for the goods/services; (6) How the
contract can be modified or extended (if at all);  (7) Confidentiality
(if necessary);  and (8) What happens if a party fails to perform its
contractual obligations.  Additionally, I want to be sure that I have
the legal terms (commonly referred to as either legal verbiage or
gobble-d-gook) that only comes into play when the parties are arguing.
When reviewing a contract, I want to see (among other things) when or
if a party can terminate the contract, what (if any) limitation of
liability is put on the parties, and how disputes will be handled.

There is no requirement that an attorney draft a contract.  Some trade
associations have basic form contracts that can be used by their
members.  Accordingly, you may want to check with any trade
associations in your field before you hire an attorney.  However, it
would be wise to have an attorney review any contract that either you
or your trade association’s attorney has drafted.

I would also point out that a recent trend with Alabama Supreme Court
decisions is  to enforce contracts.  While I have not done an
exhaustive study, I have not seen or heard of a recent decision where
the court has struck down a contractual provision.  Many recent
decisions have indeed enforced contracts to the letter, with particular
attention to exclusive jurisdiction clauses (the Borat case),  unsigned
contracts (Elizabeth Homes v Cato) and "No Hire" Provisions (In parte
Howell Engineering and Surveying, Inc.).  Thus, next time you are
signing a long complex form document, you would do well to assume that
all of the provisions are binding.

To summarize, let me leave you with a poem:

Contracts by Not Robert Frost

Some are simple, some are long
Some are oral, some are wrong
When goods and services you provide,
best beware
A contract is the best way to get you there
And when you sign that complex form, do take heed
the Supreme Court will enforce everything indeed

Thanks to my colleague, Russell Cunningham, who assisted in the
drafting of this article, except for the poem, of which he disavows all
knowledge.

Mike Goodrich, Goodrich Law Firm, LLC
Russell M. Cunningham, IV, Cunningham Firm, LLC

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