We often hear from frazzled business owners about routine contracts gone wrong. What seemed like a simple service agreement has gone south. They want their money back, or at least cut their losses, but when they call to cancel the contract, they learn they are stuck. All too often, what the service representative told them to get the sale was not consistent with the contract, they are locked into more time because they missed a renewal deadline, or buried in the “fine print” were one-sided provisions like being bound to the law of a state like California.
Businesses commonly rely on standard form contracts in their dealings with other businesses. These “take it or leave it” arrangements (which lawyers call adhesion contracts) usually provide terms and conditions that are set out by one of the parties and the other party has little to no ability to negotiate more favorable terms. For some contracts, like internet service, the juice is worth the squeeze and a business will look past the terms and conditions to focus on the end result, the price paid and/or the service provided. In other situations, businesses may be concerned about the terms and conditions, however, they do not realize they can negotiate more favorable terms. Even worse, they sign without reading the “fine print”.
At a minimum, it is important to know and understand what the form contract provides. Below are some common legal terms and conditions that you should be mindful of before you sign your next form contract.
- Termination/Renewals: Is there a fixed time period to the contract or does the contract automatically continue unless one party takes action?
- Entire Agreement: Are the parties bound to what is written in the contract or can you include items that were previously discussed in prior conversations or emails?
- Exhibits or Incorporation by Reference: Does the contract reference additional terms and conditions not provided for in the actual contract but on a separate document or website? Can those additional terms be changed by one party without the other party having a chance to agree to the change?
- Dispute Resolution: If an issue arose during the contract, can you bring a claim in court? Before a jury? Or were those rights waived by an agreement that all disputes will be resolved through arbitration or mediation? What are arbitration and mediation anyway?
- Attorneys’ Fees: Could you be stuck paying the other side’s lawyer bills in the event your account goes into collections or there is some other dispute about the contract?
- Choice of Law/Forum: The parties and services are located in Maryland, yet the contract governed by the law of another state. Can you bring a claim in Maryland or are you bound to bring the claim in another state? Which state’s law will apply?
These are just some (not all) terms buried in the fine print that you should be mindful of before signing your next standard form contract. If you do not understand the legalese, contact us for assistance.
If you have questions about this article or about reviewing standard form contracts, contact Jose Espejo at McMillan Metro Faerber, P.C. at (301) 251-1180, jespejo@mcmillanmetro.com.
Want to sharpen your contracting skills? You are cordially invited to attend McMillan Metro Faerber, P.C.’s seminar series “Business Contracts 101”. Firm attorneys will speak on the basics of contract review and contract enforceability. The dates are as follows:
Session One – July 30th 8:30 to 10:30 am
Session One – September 17th 8:30 to 10:30 am
Session Two – September 26th 8:30 to 10:30 am
RSVP by calling (240) 778-2319. The 2nd session that takes place on September 26, 2019 will focus on effective contract negotiation strategies.
