The question should be: When do you not need a lawyer for business contracts?
Okay, maybe you don’t need one when you’re simply buying a product or acquiring some services, but if you are entering into a business contract that has serious ramifications for any breaches or failure to perform, you should seek assistance from a business lawyer.
If you are the party that is preparing the contract, you should have a lawyer assist you to ensure that all the important clauses are included in the drafting of the contract.
If you are the party that is receiving the contract, it may be even more vital to have a lawyer assist you. Your lawyer will be able to thoroughly review the contract and explain your rights and obligations under the contract. If there are any parts that you are uncomfortable with, this must be negotiated prior to the signing of the contract. Once a contract is signed, renegotiating the terms or trying to get out of the contract is not impossible, but could be very difficult and costly.
So which contracts should be reviewed by a lawyer?
Below are 3 of the most common business contracts that a small or medium sized business may encounter which should definitely be drafted or reviewed with the assistance of a good business lawyer.
1. Sale of business contracts
Regardless of whether you are the seller or the buyer of a business, you should definitely consult with a lawyer. If you are the seller, you need to ensure that all future liabilities of the business are properly transferred to the purchaser. If you are the purchaser, you need to make sure that the contract clearly sets out what you will and will not receive for the purchase price. In a sale of business, sellers and purchasers cannot rely merely on verbal agreements. The sale of business contract is the final agreement between the parties.
2. Employment contracts
As a business owner, employees are one of your greatest assets. It is important that the employment contract is fair and that your employees are aware of their entitlements under the Fair Work Act. However, it is also important to protect your other assets. Employment contracts should have clauses covering intellectual property so that anything the employee creates or designs in the course of employment remains with you, and also confidential information to ensure that employees do not divulge information that is confidential to your business e.g. supplier and client information, to the general public as it may cause significant damage to your business.
3. Shareholders agreements
The contract you have with your business partners is one of the most important contracts that your business will enter into. Shareholders agreements need to clearly set out the rights and obligations of each shareholder, their duties to the company, and what actions require unanimous, or at least, majority approval. The shareholders agreement also needs to have a proper dispute resolution procedure. The last thing you need when you have a dispute is another dispute about how to resolve the dispute. This is a waste of time and money for all parties involved, and diverts your attention from the operations of the business.
As stated previously, you probably do not need a lawyer when you are purchasing an item online or simply requesting some hairdressing or cleaning services. However, wherever there is a contract that has significant consequences for your business, you should have it reviewed by a lawyer. Being stuck in a contract which is detrimental to your business could cause significant monetary and reputation losses to your business.