Legal Corner: Contract Drafting

By:   Michael Balascio and Michelle Rutherford

Barrasso Kupperman legal cornerLegal Corner, a recurring column in Silicon Bayou News, features a discussion of legal issues relevant to entrepreneurs and start-ups. Legal Corner is authored and edited by Michael Balascio and Michelle Rutherford, associates at the New Orleans-based law firm Barrasso Usdin Kupperman Freeman & Sarver, L.L.C.  Michael and Michelle have significant experience advising small companies and start-ups with strategic and legal decisions.  They are both licensed to practice law in Louisiana – with Michael also licensed in Massachusetts and New York, and Michelle in California.  See for more about their background and experience.

Memorializing your agreements in a written contract with clients or vendors can be time-consuming and difficult.  There are numerous potential pitfalls, and entrepreneurs should pay attention both to the minutia and to the broader implications that the benefits and obligations conferred by the contract may have on a business.  Below are a few tips on drafting basic contracts:

  1. Anticipate Conflicts: A contract’s language is most relevant and critical when disputes arise.  As you draft, think about how the contract’s provisions will operate when there’s a breach or dispute regarding performance.  What happens if one party fails to deliver the specified product, or fails to deliver work product that is acceptable to the other party?  What if payment is delayed?  Think about what remedies the contract provides in these instances, and state them clearly in the document.
  2. Don’t Draft from Scratch: There’s no need to reinvent the wheel in drafting a contract.  There are myriad examples and templates available to work from, which will save you time and provide guidance.  Tap your professional network for examples of written contracts to get started.  While you likely won’t want to adopt these examples entirely, they may provide a useful starting point.
  3. Be Specific: Set clear guidelines in the contract regarding timing and deliverables.  Be specific about the product you will provide, and how and when you or your vendors will be compensated.  Specificity about these key elements may avoid disputes over the life of the contract.
  4. Understand Everything: Don’t adopt boilerplate provisions that you don’t understand just because they were included in a form.  Make sure you understand the effect of every provision that you or the counter-party includes in the draft, and seek advice if you don’t.
  5. Negotiate Efficiently: Your client or vendor may have comments or suggested changes to the contract.  Rather than fighting over every detail, make sure that you know which provisions are critical to you.  Give ground on details that are less important if it allows you to preserve other elements of the contract.

As your business grows, your agreements with clients and vendors will likely get more complex.  Consult an attorney to understand all of the legal issues implicated by your business contracts.

This article is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. The article content should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Initial contact by email does not create an attorney-client relationship.