Practice Pointers

Making Sure You Get Paid For Your Services

Posted by on Jul 2, 2013 in Draft Your Contract, Practice Pointers

If your company performs services for a fee, you know first-hand how great it is and how much of a relief it is when you get paid….on time and in the correct amount, that is.   While it is great when things work out and you can move onto the next project, it is unfortunately common for service providers to run into trouble when it’s time to collect for the services they’ve performed.  Here are ways to help make sure you get paid for your services: (1)    For any contract you enter into under which you agree to provide services for a fee, it is important for the contract to clearly set out the method and timing of payment, as well as any penalties that will be assessed if the payment is not made timely. (2)    It is also very important that the contract contain a provision entitling you to recover your attorney fees and related expenses should you have to retain an attorney to help you collect what you are owed under the contract.  Late fee penalties and attorney fees provisions in contracts provide strong incentives for the other party to pay you on time and in full.  Including an attorney fees provision in a contract is especially important in situations where the contract fee for your services is relatively small.  Without an attorney fees provision, the other party may simply refuse to pay you knowing that it will be cost prohibitive for you to sue them, i.e., you will end up spending as much or more on attorneys than the amount of contract fees you are actually owed without the ability to recover the attorney fees you incur in the process. (3)    It also important that you always invoice the other party per the time intervals for payment set forth in the contract (e.g., if the contract provides that you are to be paid every month, you should submit an invoice every month).  In addition to clearly setting forth the fee amount due and due date for payment, your invoices should also note the late fee penalties that will accrue if payment is not timely made as per the contract as well as your right to recover your attorney fees and expenses if you retain legal counsel to assist you in collecting the amounts due. These simple steps will provide you with a first line of protection against the other party to the contract not paying you for your services on time and/or in full. Remember though, before you sign any contract, you should always consider having your attorney review it to make sure you are properly...

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Best Efforts or Reasonable Efforts? — How Legal Efforts Standards Can Affect You

Posted by on Jun 28, 2013 in Draft Your Contract, Practice Pointers

It’s very popular for people to talk about giving “110%” these days.  Suddenly, giving 100% effort seems like slacking.  And what about just partial attempts, like 75%?  Although they are contract provisions that are often overlooked, “efforts” provisions can have a huge impact on your business deal. Before entering into any contract, you should know what “effort” qualifiers exist and what they mean– because understanding these provisions could make the difference between having a claim under a contract or being subject to a breach of contract claim yourself. The three most common effort qualifiers in contracts are (1) Best Efforts, (2) Reasonable Efforts and (3) Commercially Reasonable Efforts. While these may seem innocuous on the surface, each phrase can mean something totally different and can subject contracting parties to completely different standards and requirements.   While some courts remain unclear on the actual distinctions between each standard, here is a brief overview:  Best Efforts –      This is often considered the most demanding of the effort based standards.  This is a gross generalization, but think about it this way–basically if it’s possible, you have to do it, regardless of whether it’s unreasonable or not commercially reasonable or cost-effective. Reasonable Efforts      – This is a middle ground between best efforts and commercially reasonable efforts.  Again– the general practical application is that there is some leeway as to whether it’s possible vs. whether it’s reasonable.  Just because it’s possible, doesn’t necessarily mean you have to do it if it’s not reasonable. Commercially Reasonable Efforts –  This is considered the least demanding effort standard. By including a commercial standard, courts look into whether it  makes sense from a business or other economic or efficiency standard. So, just because it’s possible and just because it’s reasonable, does not mean you have to do it if it’s not necessarily reasonable for your business. So, the next time you are reviewing a contract or signing a contract, keep an eye out for any effort based provisions and consider how they might change the deal and whether you would rather a different standard be put in place – whether a higher or lower. To the extent possible, it is often preferable to define what standard should apply in more detail, but if one of the more generic standards is used make sure it aligns with your business...

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Business Practice Pointer: Avoiding Verbal Agreements

Posted by on Jun 25, 2013 in Draft Your Contract, Practice Pointers

Many of the business disputes our clients face are the result of a misunderstanding or miscommunication concerning the parties’ respective obligations under a given contract.  While many startups or entrepreneurs may not believe they are in the contract formation stage of their business yet, they may easily engage in conduct or conversations that can lead to similar business disputes down the line. One classic mistake many businesses and entrepreneurs make is coming to a verbal agreement that is not memorialized in any “provable” fashion.  When a discussion or negotiation occurs verbally, whether over the phone or in person, it is difficult to prove the content or outcome of the discussion should there be any disagreement in the future concerning what was said (unless someone was recording the conversation!). Whether the discussion concerns the scope or timing of work or services to be performed, or whether the discussion concerns something seemingly more mundane, such as when the next discussion will occur, it is important to remember that, if it isn’t written or recorded in some manner, then it will be difficult to clarify or prove later should the need arise. We hear from clients and entrepreneurs all the time about how they thought one thing, engaged in behavior based on their belief (or, even worse, incurred expenses based on their belief!), only to find out the other party had a completely different understanding.  When we ask whether either party can prove what the understanding was, the typical response is, “Well, we discussed it over the phone,” or, “We just talked about it when we ran into each other.” The lesson to be learned is that, whenever possible and whenever you can remember, try to make a habit out of following up a verbal conversation with a written re-cap.  Usually a simple email will work, such as: — “Hey, it was great seeing you today and talking about _______.  As I mentioned, I will  _______ and be ready to discuss it with you on ______.”     — “I wanted to follow up our conversation earlier today and say ‘thank you’ for your willingness to take care of _____.” — “I wanted to thank you for your understanding that I am going to need more time to _______.” By following up verbal agreements with a written reference or summary, you ensure that, at the very least, there is something to help substantiate that the occurrence and the scope of the conversation. NOTE:  If you do not want to be able to substantiate the occurrence or scope of a conversation (i.e. it will be beneficial to you to not be able to prove it later), then you may want to intentionally fail to follow up.  However, you can use the follow up to your advantage by indicating in your email what your understanding was. At any rate, as we often tell our business clients:   Although you may not think the content of the conversation could ever turn into a real problem, there’s never a problem until there’s a...

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