Protecting Your Assets: Know Your Contract Rules

Limiting exposure to liabilities can protect your business assets. While it is not possible to shield yourself from all litigation, it is within your power to limit your exposure and costs. Limiting liabilities requires you to fully understand the rules of each contract. Hiring a lawyer to write and review contracts before you sign them is the best way to save yourself both time and money in the long run. Otherwise, here are some of the issues you need to identify in order to truly understand your contract:

Duties and Obligations. Most contract paragraphs assign a duty or obligation to at least one of the parties. Make sure you identify the duty/obligation in each paragraph and identify who said duty/obligation is assigned to.

Conditions. While you are determining each party’s duties/obligations, you need to also determine whether a duty/obligation is tied to a condition. For example, “Ava shall pay $300 to Delilah upon receipt of the products.” Ava’s duty to pay is dependent on Ava receiving the products. If Ava does not receive the products, then she has no duty to pay. Alternatively, “Jayden shall pay $300 and Marquis shall deliver the products to Jayden’s business.” Here both Jayden and Marquis have an independent duty and both must comply no matter what the other party does.

Breach Expectations. Not all breaches are equal. A “material breach” by the other side will release you of your duties/obligations under the contract. However, if the other side commits a “non-material breach”, the law expects you to continue comply with your duties/obligations. For example, you might be expected to pay your painter for painting your wall the wrong shade of yellow and then sue him for the cost of the paint and labor to paint the wall the proper shade of yellow. Whether a breach is material is a generally an issue you will need to consult a lawyer about. Before you stop performing, look to your contract for any direction as to what you are expected to do in the event a breach occurs. If there is no clear guidance in the contract, seek legal advice.

Excuse from Performance. There are several ways in which one party can be excused from performing such as material breach, frustration of purpose, and anticipatory repudiation. There is nothing simple about breaching a contract. If you cannot perform your duties under a contract, contact a lawyer. Many times, honest negotiations can minimize your liability exposure as a result of the breach.

For more information, contact The Reyne Law Group at reynelawgroup@gmail.com.

*This Blog is made available by The Reyne Law Firm 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. By using this blog you understand that there is no attorney client relationship between you and The Reyne Law Group. The blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

By | 2017-09-28T08:50:26+00:00 September 19th, 2017|Contract, Lawyer|0 Comments

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