Contracts are important and “the devil is in the details.” Too often I see business owners and experienced entrepreneurs come to me as first time clients with a serious problem. But when we go to review the contract that is at the heart of the issue, I often find that the contract was not professionally drafted, does not address many issues that should have been addressed or simply does not make sense in the context of the transaction.
Unfortunately, once a problem arises, it is almost always after the ink is dry and the writing is on the wall so to speak. In short, you’re stuck trying to enforce, or defending against, a contract that simply does not say what your new client thought that it said.
I recently had a new client come to me with a problem. He had invested hundreds of thousands of dollars into the purchase of a business. This client is an experienced entrepreneur with numerous successful business ventures. However, he did not have an attorney review the purchase documents prior to closing. The client sheepishly admitted that it was because he thought he would save himself some money in legal fees. In short, after the deal closed, the client learned that the business he had purchased was not worth even close to what he had invested in it.
While not a handshake deal, my client had trusted the people that he was dealing with to be forthcoming and truthful. Unfortunately, that was simply not the case. To add insult to injury, the contract documents were extremely vague and one sided in favor of the seller—not my client.
In this situation, if the client had invested roughly $3,000-5,000.00 in legal fees on the front end, it could have saved him hundreds of thousands of dollars. Unfortunately, this client’s story is not unique. Many investors and entrepreneurs avoid hiring an attorney to review their agreements related to their business transactions to save time and money. Similarly, many businesses are working with old outdated contracts.
If you are entering into a new business venture, or contract of any kind, have an attorney review the documents. A small investment now may save you a great deal of time, money and heartache later.