How important is it to include a termination provision?
Termination provisions are important as they define the abilities of the contract parties to terminate the contract. Normally, there are three termination types found in contracts: termination without cause; termination with cause; and immediate termination for cause. However, some countries have laws that prevent you from terminating the contract, even if you have cause, so pay attention to the laws where the other party is located. You can designate the law you want to apply to the contract, so it may be important to designate California law.
Can business owners write and review contracts on their own, or should they engage an adviser?
The parties can prepare a letter of intent document setting forth the business terms. They should certainly set out what they envision the terms of the contract to include. However, it should then be handed over to a lawyer to draft the actual agreement that is going to be executed.
Many business owners just sign a contract without reading it or really understanding it, especially if they trust the party on the other side. Then they find themselves in a bad situation because they used a form contract, the relationship falls apart and they’re in litigation with a signed provision that’s going to be used against them.
Especially with newer businesses, owners may not want to incur what they view as unnecessary costs of retaining an adviser. It may cost a little more up front to have a good agreement in writing that is reviewed by an appropriate party, but it’s going to be less costly in the long run should litigation arise.
If you have an agreement that has good contract provisions, that litigation is going to be a lot easier and quicker to resolve, and a lot less costly.
Courtney Hill is a senior attorney at Theodora Oringher Miller & Richman PC. Reach her at (310) 788-3575 or [email protected].
