Mar 7, 2011
One area in which a business lawyer can assist a small to mid-sized business, is the creation or review of the business’s contract with its customers.
If the contract currently being used consists of little more than a statement of the price and general statement about a warranty period, the business is seriously risking liability and foregoing protections most companies have in their contracts.
The first consideration is to specify exactly what is to be provided (including terms that deal with products that are sold by quantity where the quantity shipped might not be exactly the amount that is ordered), what the cost is, and how and when it is to be paid. This must be clear, and the customer’s agreement to that, as well as the customer’s agreement to the other terms of the sale, must be obtained.
One important area is in the limitation of liability. The customer will not be limited to merely seeking a repair or refund unless that is specified in the contract. Claims for lost profits, or the cost of obtaining a repair or replacement from an alternative supplier also may be pursued by the customer. In addition, the exact scope of the warranty should be defined, so that a business is not sued for selling a product or service that meets industry standards, but failed to meet a customer’s particular needs. There should be a time period for making claims, so that the customer does not make a claim years after a product or service is supplied, when determining the cause of the problem might be impossible. In addition, the customer should obtain prior approval before returning products the customer believes are defective.
Other important issues for inclusion include provisions permitting the business to recover attorneys’ fees and expenses or collection costs, in the event the customer fails to pay, as well as a legal interest charge for late payments. Consideration also should be given to requiring disputes to be brought in a particular court, or jurisdiction, or perhaps submitted to arbitration.
In some types of contracts there are intellectual property issues; if the customer is receiving software, for example, there would be many issues of ownership and restrictions on reselling. If the service might involve the creation of new products or other intellectual property, the contract should deal with the ownership of these inventions.
Some products involving hazardous materials require special provisions to deal with their use, or the use of the containers in which they are supplied.
Finally, where contracts are not signed, but instead sales are made only through responses to purchase orders, there should be consideration to how the seller might win the “battle of the forms.” While not feasible in every situation, the seller should realize that just because it sends an invoice with legal protections, this does not necessarily mean that those protections will apply in a dispute.
Gary Whitaker has dealt for years with these types of business law issues, which involve an understanding not only of the law, but also of business realities. This means that the best contract is not necessarily the one that is the longest, or has terms that are most onerous to the customers, who might object strenuously if they read it. This involves judgement and discussions with the company’s officers of the options available. Mr. Whitaker can help give a business owner confidence that the sales or service contract the business uses will provide the protection and rights the owner expects, while not being a cause of serious and unnecessarily customer concerns.
Mr. Whitaker’s focus is on providing cost efficient and high quality business law services in areas such as contract law to companies in north Atlanta, including Gwinnett, Hall, Fulton, DeKalb and Forsyth Counties.
Gary R Whitaker