Tuesday, May 30, 2017

Dangers of Drafting A Contract Yourself

September 18, 2009 by  
Filed under Business Law

Today’s Preventive Law TipIf you are going to draft your own contract, you need to understand EVERY clause in it AND THE CONSEQUENCES.

Many small business owners use readily available form contracts to enter into all types of business deals, from sales and purchases, to financing and leasing contracts.  While these forms offer a low-cost convenience, they are not customized and may leave out important contingencies unique to your deal.  Or worse yet, they may have clauses which are irrelevant or specifically wrong for your transaction.

For instance, two business men from California and Texas enter into a purchase and sale contract for goods using a form contract.  The deal goes wrong and one man wants to enforce the contract against the other.  In the contract, the choice of law and jurisdiction is Wyoming.  Do you see how this could get ugly and expensive?

What happens if you try to modify the contract and end up including contradictory clauses in the contract?  For example, what if you enter into an asset purchase agreement and you modify the contract to include a financing contingency, but another clause in the contract specifically states “this purchase agreement is effective upon execution and not subject to inspection or financing contingencies.”

As you can see with these real life examples, many things can go wrong if your contract does not cover situations specific to your deal.  The result can be expensive litigation to interpret and enforce a defective contract.  This can cost thousands of dollars more than the cost of prevention from the beginning.

A well-drafted contract can prevent a lawsuit or at least minimize the costs of litigation.

If you are dealing with a reasonable person, the fact that they have signed a written document which outlines the problem and a way to solve it is enough to end the disagreement.

If you are dealing with an unreasonable person who decides to hire a reasonable lawyer to sue you (even though the contract is clear), the lawyer will take a look at the contract and see that they have no case.

If you are dealing with an unreasonable person who hires an unreasonable lawyer who sues you anyway, the judge and/or jury will enforce the contract as written.

When in doubt, hire an attorney to draft a contract specific to your needs.

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Proviso Law Group provides attorney services in the areas of Business Law, Estate Planning, Wills, Trusts, Probate and Trust Administration.  We are located in Manhattan Beach, California near Hermosa Beach, Redondo Beach, El Segundo, Torrance, Hawthorne, Culver City, Los Angeles, Orange County, Gardena, Lawndale, South Bay.

Comments

One Response to “Dangers of Drafting A Contract Yourself”
  1. always get a professional

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