Protect Yourself with a Revised Contract

Written by Paul Farahvar, Partner Cuisinier, Farahvar & Benson

If you are like most small business owners, your business involves countless written contracts with vendors, suppliers, service providers and other contractors. You probably also simply review and use the contracts provided by them or dust off one of your old contracts, then cut and paste the information you need to finalize an agreement, throwing in words here and there that you think will protect you.

WRONG. If you do either of the above, you are doing both yourself and your business an immense disservice. More importantly, you may be putting your business, and perhaps yourself, in jeopardy if there is a dispute or an accident which results in litigation.

More often than not, it is when you accept a contract from a third party that the language of the contract drafted is in their best interests and not yours. While you may be negotiating the bottom line on costs or fees, or matters dealing with timeliness or deadlines, the other “small print” issues like liability and attorney’s fees may be largely overlooked. Some of the language in the contract may be exposing you to risks that you simply could not have anticipated. As a result, this potential liability is never communicated to your insurance broker, which in turn leaves you to defend yourself in litigation. And anyone who has been a party to any litigation knows that the cost and time associated with a lawsuit is burdensome.

As to dusting off a previous contract, what most business owners do not realize is that the contract they have been using may be outdated. This can be true whether the contract is from 1975 or 2009. Some of the language in contracts from old vendor agreements, even those used as recent as only two months ago, may be outdated. As a result, you may not be aware of any legal ramifications which could cost you in the event of a dispute. The law is a living, breathing entity that changes frequently over time. Any case that is decided on a contract dispute or an insurance coverage dispute can affect your rights.

If you are unsure of any language within a contract, it is always best to consult an attorney. If you already have an attorney, it is a good idea to have them review and explain the language in your existing agreements. Finally, alert your insurance broker to any items in a contact to ensure that you are covered in the case of a dispute. Better to be safe than sorry.

Paul Farahvar is a partner with Cuisinier, Farahvar & Benson specializing in insurance defense and civil litigation. http://www.cfblaw.net 312-634-0412. paul@cfblaw.net