Common Critical Mistakes in Contracts (Even Ones Prepared By Attorneys)

Do NOT miss the chance to add, delete, or change something needed in a contract – it can and will come back to bite you! These are just some of the issues we see often. Remember, it is too late to find out you are on thin ice after falling through!

1. Using cut and paste or recycled forms (special note on restrictive covenants)

You don’t know something is missing or wrong unless you know what is missing or wrong, why, and how to fix it. To know why, every situation has to be looked at differently. For example, employment contracts can be unenforceable in Pennsylvania but enforceable in New Jersey. Why? Because in Pennsylvania existing (but not newly) hired employees need something extra to be bound to a prohibition on competition; not so in New Jersey.

2. Failing to pick what states law applies to disputes, and where the disputes are resolved.

Without those specified (or used without another clause prohibiting unwritten or unsigned changes-see Point 3 below), you leave the door open for “he said/she said”. Only a proper integration clause shuts the door on claims that the Agreement was incomplete or changed. BEWARE, even a seemingly standard integration clause may not be enough. When parties have or had more than 1 agreement (similar or not), the clause protection could fail if not tailored to that circumstance. With the proper language, the parties are limited to the actual terms of the contract alone, and on its stated subject, becoming a really easy way to limit issues in dispute if there is one. It lets a dispute be resolved quicker/cheaper. A contract breaker has little reason to want a dispute resolved quickly. So particularly if you are trying to enforce an agreement, you probably want that closure ASAP. This is one way.

3. No proper “entire agreement” provision (also known as an “integration” clause).

What if an “entire agreement” (“integration” clause), is missing from a contract? Or if used, without another clause prohibiting unwritten or unsigned changes (see Item 4 below), THEN you leave the door open for “he said/she said”. Why? Because only a proper integration clause shuts the door on claims that a Contract was incomplete or later changed. BEWARE, even a seemingly standard provision like that may not be enough. More than 1 agreement may exist between parties-not all may be in dispute. An integration clause will fail if not tailored to that circumstance. With the proper language, the parties are limited to the actual terms of the contract and nothing more. That makes it as easy as possible to limit legal issues for dispute. It keeps the focus of the dispute limited, and usually lets the dispute be resolved quicker/cheaper. Remember a contract breaker lacks incentive for a dispute to be resolved quickly. A contract enforcer usually wants relief ASAP. Proper language will not only protect you, but facilitate an optimal outcome!

All rights reserved 2015 Elliot Mark Olen ©

4. Not using “prohibition on changes” language.

Typically, contract changes must be limited to written ones, signed by every party to that contract. If not, even an integration clause will not be as effective as possible. Why? Because a contract may be an entire agreement when made; but changes can be made or alleged as occurring later. Back to “he said/she said”.

5. Not providing what happens if a contract is broken

Does a dispute winner get back his attorney fees? His costs? Interest? All must be specified if you want those remedies. What if both parties break an agreement? What if one does, then can the other? The solution is to specify whether obligations in a contract are “independent or dependent covenants”. That is important. If one side breaks a contract, the other rarely wants to be at risk for not continuing to perform. Just consider this example. You agree not to compete against an employer. Employer agrees to pay you commissions, bonuses or expense reimbursement. Without a dependence of covenants clause, the Employer can enforce the prohibition on competition without first paying what you are due.

Author of this guide:

Elliot Mark Olen Esq.

Olen Law Office

Business Attorney

Fairless Hills, Bucks County, Pa.

www.olenlaw.com

All rights reserved 2015 Elliot Mark Olen ©