Tag Archives: contract

Contracts

Independent Contractor/Freelancer Contracts

If you are an independent contractor or freelancer, you may be working for others without having a contract in place. Unfortunately, working without a written agreement makes you vulnerable to being taken advantage of. A contract is beneficial in many ways because it not only protects you legally, it also assists with scheduling issues and the overall relationship with your client because you both know what has been agreed upon and what should be expected.

Many freelancers start out believing they don’t need a contract, but most soon discover they were wrong when a client fails to pay or makes so many change requests that they don’t make any money on the job. Having a contract that allows you to charge for revisions helps ensure that you make a profit on your work.

Why are contracts so intimidating? For most people, it is the fear of the unknown. Having a contract attorney assist you with creating an agreement that works for your unique situation is important. Once you have the basic document drafted, you can use it with all of your clients, making revisions where needed to suit each job. Below are a few of the general areas you will want your contract to cover:

  • Classification is key. It’s very important to classify your workers as contractors for tax purposes. An oversight on your end can lead to trouble with the IRS. Make sure you properly classify your worker as an independent contractor and lay out a few of the key factors that point to a contractor relationship (behavioral factors and scope of control, for example) in writing.
  • Scope of work must be clearly defined. The work that your independent contractors will perform for your business should be confined to a certain scope, in order to properly differentiate them from an employee. This provision should therefore include a description of the services and work that your independent contractors will render for you.
  • Be specific about payment. Payment details should be clearly stipulated in the agreement. While payment by the hour, week, or month usually indicates that a worker is an employee, payment that’s made based on a particular job, project, or that’s based on a straight commission tends to be more common when it comes to independent contractors.
  • Explain who’s paying for expenses. It’s important that you specify who will pay for the expenses and take care of the supplies and other necessary purchases in the course of the work performed by the independent contractor. Usually, the supplies and expenses are covered by the independent contractor himself. But it’s best to have this in writing, just in case of a dispute.
  • No entitlement to employee benefits. Independent contractors are not eligible for most of the benefits that employees qualify for. This includes unemployment compensation (an independent contractor is also far more free to leave whenever he or she wants to), worker’s compensation, health insurance, and disability insurance.
  • Rate of pay. Your contract should clearly outline your rates and how the client will be charged. If you charge by the hour, you should include a minimum and maximum work-hour clause, which protects both you (in case you finish early) and your client (in case you take longer than expected).
  • Payment schedule. Most independent contractors require an upfront payment, with the remainder being paid in installments as the job progresses. Whatever your preference is for your payment schedule, make sure it is clearly set forth in the contract. You should also state how you should get paid and whether there is a grace period after the due date.
  • Point of contact. If you are dealing with a client that has several different individuals giving you feedback, it can get messy. Your contract should appoint a single point of contact that all communication should be funneled through. This prevents conflicts, confusion and double work for you.
  • Cancellation fee. If the project you are working on gets cancelled, you want to make sure you get paid for the work you have performed. You may charge a flat fee or establish a cancellation fee schedule, but you want to make sure you get paid for the work you did even if it won’t be used by the client.
  • Having a deadline protects both you and the client. The client needs to know when the project will be finished and you need to know how to schedule the work out. You also need a clause allowing an extension of your deadline if the client fails to provide the required information, feedback or approval in time.

To learn more about protecting yourself with an independent contractor or freelance contract, call Leslie S. Marell.

Business, Contracts

How to Expedite the Legal Review

When you are negotiating a contract with another party, it can be a complex and lengthy process. Below are a few tips to help expedite the legal review process before you even involve your attorney:

  • Before you give the other side a copy of the contract, talk over the major issues. Create a checklist of issues to discuss so you can determine where the starting point is for both sides before the negotiations even begin.
  • Once you discover the issues where the parties disagree, try to negotiate and reach an agreement on as many of them as possible. The more you can work through before the attorneys get involved, the better off you are likely to be. Even a “legal” clause such as the warranty provision should be discussed. Talk through what the warranty includes, how long it will last, and the deadline for fixing the problem.
  • Wherever possible, you’ll want to start working with a standard template; However you can’t rely on a standard template and simply fill in the blanks. Remember, this is a unique transaction that should include the deal points you have agreed upon. You will have to make revisions to any template to conform to the deal.
  • If the other party is making significant changes to the contract, don’t be afraid to ask questions about why they are being made. Asking these questions will provide you with information about the other side’s concerns, which is critical in reaching an agreement.
  • Discuss the business aspects of all clauses, even the “legal” or standard clauses. For example, if the supplier insists on inserting a limitation of liability, ask what the supplier expects it should be responsible for if their product is defective and it’s in the field.
  • Get creative in finding solutions to avoid problems, or minimize their impact. For example, in the purchase of capital equipment, you might discuss some form of limitation of liability in exchange for the supplier providing no charge monthly preventative maintenance and on site spare part consignment. Talk in real world terms with real world approaches to heading off the problem of faster resolutions.

Most importantly, don’t simply “hand off” the contract to your attorney. Schedule a meeting with your lawyer to discuss what has been negotiated between the parties and the reasons for the other party’s exceptions. You should stay engaged in the process and encourage your counterpart to do the same.

If you follow the above tips, it will reduce the time involved in the legal review process and help ensure you achieve a positive result. When you are ready to involve an attorney, contact Leslie S. Marell.

Contracts

Why your Contract Should Contain a “Defense Clause”

A “defense clause” is a provision that establishes the duty to defend the other party to a contract in certain circumstances, such as preparing for and defending a lawsuit. It is commonly found in an agreement in conjunction with indemnification clauses and hold harmless provisions.

The party that has undertaken the obligation to defend is given control over the defense. In contrast to indemnification, the duty to defend is usually triggered when there is a claim, not after a judgment has been rendered or loss has been established. Thus, indemnification and the duty to defend are two separate provisions creating distinct rights and obligations.

Agreeing to the duty to defend is a significant undertaking. There is a significant amount of time, money and effort that must go into preparing for and defending litigation. The defending party can hire its own lawyer to handle the trial for the party being defended, which can be a downside to agreeing to a defense clause. The specifics governing how counsel will be selected and who has authority to settle the claim should also be detailed in the defense clause.

Some parties, especially those that are self-insured, prefer to retain control over their own defense. As such, they try to negotiate a defense clause out of the contract. If you want to retain control over your own defense at trial, avoid the defense language and focus on the indemnification and hold harmless provisions.

When you are negotiating a contract, it is wise to retain counsel early in the negotiation process to help ensure the agreement is drafted to meet your needs and protect your best interests. Indemnification, hold harmless and defense clauses significantly impact the degree of your liability. Leslie S. Marell can help you understand the extent to which you are taking on or shifting risk in your agreement. To ensure that your contract provides you with the most protection from liability available, contact us to schedule an appointment. Our office is located in Torrance, California, but we proudly serve businesses of all sizes from all over the country.

 

Contracts

Indemnification Clauses

Most contracts contain indemnification clauses, but few parties take the time to read them or fully understand what they mean. Although the language used may appear to be “boiler plate” or standard contract language, an indemnity clause can be a significant part of the agreement that you want to negotiate for your benefit.

An indemnification clause imposes an obligation on one party (or both parties in certain circumstances) to compensate the other party for any loss or damages outlined in the provision. The compensation provided for in an indemnification clause is separate from other contractual damages. A common form of damages provided for in an indemnification clause is the loss associated with one party having to defend a lawsuit filed by a third-party.

By way of example, if Car Seller enters a contract with Part Maker, Car Seller may seek to be indemnified by Part Maker if the part is found to be defective. Thus, if Car Seller is sued by a driver that was injured by the defective part, Part Maker could be held liable for Car Seller’s reasonable attorney’s fees and costs incurred in defending the lawsuit.

Indemnification clauses can be written very narrowly so the indemnification obligation only arises under specific circumstances, or it can be written more broadly so the indemnification obligation arises for any loss that results out of an event resulting from the agreement. Additionally, the parties covered by the indemnification clause can be narrowly or broadly defined. It may state that only the entity is indemnified, or it may include the entity’s officers, directors, trustees, employees, agents and affiliates. Finally, the indemnity may set forth a higher standard of “gross negligence” instead of “negligence.”

There are numerous factors to be considered in indemnity clauses. Don’t assume the clause protects you because it appears to be standard language. Contact Leslie S. Marell to discuss indemnification and to ensure that you are protected before you sign a contract.

 

Business

Essentials for Employment Contracts

When your business is ready to hire employees, it is essential to get legal help. An employment contract can be used to outline the legal relationship between your entity and your employees so there is no confusion regarding the rights and duties of the parties. Having an agreement in writing can help your business avoid misunderstandings and litigation in the future.

An employment contract should be drafted to meet your business’s specific needs and the job position covered in the agreement, but below are a few factors to consider:

  • The contract should set forth all information regarding how the employee will be paid, including salary, hourly wages, commissions and bonuses.
  • The hours the employee is expected to work should be defined, as well as whether the worker is expected to perform his or her job duties in the office or if he or she has the ability to work remotely.
  • If your business intends to grant equity in the company to attract employees, the terms should be detailed in the employee contract. This includes addressing topics such as the type of stock grant, exercise price, options for acceleration and vesting term.
  • Any benefits that will be provided to your employees should be covered in the agreement. Examples of benefits to address are 401k or pension programs, health insurance, vacation and sick leave, maternity or paternity leave and other similar perks of the job. The contract should specifically discuss any requirements that must be met before the benefits can be exercised.
  • You should have your employee sign a non-disclosure agreement (NDA). This could be a stand alone agreement, or it could be made a part of the employment contract. It is important to describe what must be kept confidential, as well as the consequences of violating the NDA provisions.
  • In most situations, you will want the contract to specify that the employment is “at will.” Otherwise, you should clearly set forth the term of employment. Additionally, the grounds for termination should be outlined and if compensation will be paid upon termination.
  • If your business is in a competitive industry, you may want to consider including a covenant not to compete for a certain period of time after the employee stops working for you. However, since the courts do not favor restraining an individual’s ability to work, you should obtain legal counsel in drafting these provisions and to determine if they are enforceable in your state. For example, California holds non-competition agreements to be unenforceable.

To ensure that your employment contract provides you with the most protection from liability available, contact Leslie S. Marell to schedule an appointment. Our office is located in Torrance, California, but we proudly serve businesses of all sizes from all over the country.

 

Contracts

Electronic Contracting: Think Before Hitting “Send!”

It is becoming a common practice for parties to use email to negotiate, review and revise contracts. While the internet makes it convenient and quicker, it can also inadvertently lead to liability. Courtrooms across the country are seeing an increase in the use of “electronic evidence.” You don’t want an opposing party to use your email exchanges as evidence of (or to disprove) the existence of a contract.

Pursuant to the Uniform Electronic Transactions Act of 1999 which has been adopted in all 50 states, a legally binding contract can be formed by use of electronic records. Electronic communications, including email, and even text messages, can be used to form binding legal contracts if the individuals have actual or apparent authority to do so. The essential requirements of a contract must still be met for the agreement to be enforceable, including an offer, acceptance and consideration exchanged between the parties. If the electronic evidence clearly establishes that these basic requirements have been met, it may be sufficient to prove the parties intended to be contractually bound and that a valid contract was formed.

How do you protect yourself when conducting contract negotiations via email? It is imperative that you are clear and succinct in outlining your intentions. All of your employees should receive detailed training regarding your business’s policies regarding electronic correspondence and to be careful in email to avoid terms such as “offer” or “accept” and to avoid unconditional “promises”. If you do not wish certain employees be able to form binding contracts by email, you should require that a prepared, blanket disclaimer paragraph be automatically inserted into every email that is sent from such employees. The disclaimer should include a statement that the sender of the email does not have authority to legally bind the company and any commitments on behalf of the company must be confirmed by either the appropriate department (such as purchasing) or the person’s manager. You should also include a statement that your business does not intend to be bound by an electronic contract and that all electronic correspondence is considered non-binding until the agreement is signed by the parties. Finally, if the other party gives you an indication that they are relying on your emails as forming a contract, you should take immediate action to set them straight. The quicker you clear up any confusion or misunderstandings, the less likely you are to be held liable.

To learn more about electronic contracts and how to protect yourself or how we can assist you with other business-related matters, contact Leslie S. Marell today.

Business, Contracts

3 Types of Agreements that Protect Your Proprietary Information

Does your business have an intangible asset that you need to protect from competitors? It could be an idea, customer list, computer code or other comparable assets. It is essential that you take steps to safeguard the aspects of your business that sets it apart from others. If you don’t do it now, it could mean costly litigation for you in the years to come.

How do your protect your intangible assets? The answer depends upon the unique circumstances surrounding your business, but the following are a few types of contracts that generally can be beneficial:

  • Intellectual property (IP). You might be surprised at what types of assets you can protect. Most businesses understand that they need a patent to protect a new invention, but you can also use a trademark to protect the source of your goods or services. Creative works can be protected by a copyright. Don’t assume you cannot protect your intangible asset. Confer with us and determine the best strategy for safeguarding your IP.
  • Non-Disclosure agreement. It should be mandatory for anyone who has access to your confidential information to sign a non-disclosure agreement. This includes your employees, independent contractors, vendors and customers. This type of agreement can limit when and how your business’s sensitive information is shared. It can also set forth your company’s available legal remedies if the contract is breached.
  • Non-Solicitation agreement. All of your main employees should execute an agreement preventing them from soliciting your business’s customers for a set period of time after they leave your employment. This type of agreement should also include a provision that your business is the owner of any IP developed while the person is working for your entity. Be aware, however, that these agreements must be carefully crafted to be enforceable and in California, they are unenforceable.

It is additionally wise to require all of your employees to password-protect their company computers with passwords, which are updated regularly. You should limit access to your confidential data to only those workers who must have it to properly perform their job duties. Your business should also back-up its digital data routinely.

If you need assistance creating any of the above contracts or you have questions regarding your company’s contractual needs, contact Leslie S. Marell for help. We serve as general counsel to clients who do not require, or choose not to employ, a full-time lawyer in-house. Call today to schedule your initial consultation.

Contracts

Four Agreements Your Business Should Have

Every business is unique and has its own legal needs. However, in my experience, four important contracts which are needed to safeguard an entity’s interests include:

Non-Disclosure Agreement

A non-disclosure agreement (also called a “confidentiality agreement”) is important to every company in every industry. This type of contract obligates third-parties to keep your private information confidential and limits the use of it to only permitted purposes set forth in the agreement. Without such a document, there are no restrictions on how or what the third party does with your confidential information. If the third-party breaches a non-disclosure agreement, it entitles you to recover remedies such as an injunction to stop the unlawful disclosure and/or damages. Even if the non-disclosure agreement is never used in litigation, it has a powerful effect by informing the third-party that they are privy to non-public information and there will be legal consequences if they violate the trust you are putting in them to safeguard it.

Purchase Order

When a transaction involves a buyer and a seller of goods or services, the purchase order (PO) becomes part of a contract between them. The PO should set forth the description, quantity, price, applicable discounts, payment terms, date of shipment, authorized signature, and any other important information relevant to the purchase. A buyer can implement PO tracking to manage inventory, improve clear communication, and create a sales history.

Sales Terms & Conditions

Outlining the sale terms is vital to protecting your business. It is a necessary document when you are doing business with your customers who issue you a PO. The terms and conditions of a transaction include topics such as exclusion of warranties, limiting remedies and narrow indemnification language. It is important to work with your legal counsel to identify issues that could have a detrimental impact on your business and properly address them in the sale terms of your contracts.

Intellectual Property Assignment Agreement

An Intellectual Property Assignment Agreement should be signed by all applicable independent contractors and vendors that work for your company when they are hired. Don’t make the mistake of believing that your business automatically owns the work produced by an independent contractor simply because you are paying them for it. An independent contractor is treated differently under the law than one of your full-time employees. To ensure that your entity owns the independent contractor’s contributions, you must have a written agreement that transfers the copyright to your company.

If you need assistance creating any of the above contracts or you have questions regarding your company’s contractual needs, contact Leslie S. Marell for help. We serve as general counsel to clients who do not require, or choose not to employ, a full-time lawyer in-house. Call today to schedule your initial consultation.

Contracts

Contractual Limitations of Liabilities

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When your company is entering into a contractual relationship with another party, it is important to set forth what will happen if there is a breach of the agreement. A “breach” is the failure of a party to perform its duties or obligations under the contract. When a breach occurs, the contract should provide the breaching party’s liability for the damages incurred by the other party.

When a breach of contract occurs, there are three major types of contract damages or compensation available to the non-breaching party. In order to make the injured party “whole,” the contract may allow for a combination of damages. The three primary types of contract damages are:

  • Compensatory. The non-breaching party is entitled to recover its direct or actual damages incurred. Compensatory damages compensate the injured party directly for its loss.
  • Incidental. Incidental damages are expenses incurred by the non-breaching party as a result of the other party’s breach. This type of damages must be reasonably associated with, or related to, the injured party’s actual damages.
  • Consequential. As the name suggests, this type of damages includes those that do not flow directly and immediately from the breach, but from the consequences of the breach. They are more indirect in nature and they are sometimes referred to as “special damages.”

If you are the seller of a product, it is important to confer with legal counsel on ways to limit your liability in the contract. Failure to do so could result in you being liable for the above types of damages if you breach the contract. Let us review the transaction before it is executed and add the necessary language to limit the scope of your potential liability. The most common way this is done is to exclude your liability for incidental or consequential damages and specify that your maximum liability under the contract is limited to the purchase price of the product at issue in the deal.

To ensure that your contract provides you with the most protection from liability available, contact Leslie S. Marell to schedule an appointment. Our office is located in Torrance, California, but we proudly serve businesses of all sizes from all over the country.

Buyer, Seller

Tips for Working with your Business Attorney

If your business is working with an attorney on an important transaction, there are a few important tips that can help ensure you obtain a successful outcome. Consider the following suggestions:

Choose the “Right” Attorney

Your business lawyer will play a very significant role in the success of your company. It is important to choose an attorney that is not only knowledgeable and experienced, but also one that you feel comfortable working with. The attorney that is the best fit for your friends, competitors or counterparts may not be the best one for you. Follow your gut instinct and retain an attorney that you trust and feel confident handling your business affairs.

Stay Involved

Don’t just hand the contract to your lawyer and consider it his or her job to negotiate and finalize it. It is an attorney’s primary goal to eliminate any risk or liability for their client. However, the nature of business involves taking risks. There is some truth to the old saying that “if there is no risk, there is no reward.” Therefore, you should inform your lawyer as to which risks your company is willing to take and which risks are deal-breakers. By understanding the risks involved, discussing them with your attorney and negotiating them accordingly, you will create a situation where the attorney is writing the language for you, NOT negotiating the deal for you.

Keep the Process Moving

Many contract negotiations get bogged down and can take days, weeks or months to finalize. Most attorneys work under different time constraints and have different goals than business people. If you give up control and let the lawyers determine the time constraints and goals, you will likely be frustrated with the result.

If you have questions regarding business law matters, contact us today to schedule an initial consultation. Leslie S. Marell has been practicing business and commercial law for over 25 years. She is established in private practice and has extensive legal experience counseling companies in the areas of business contracts and transactions, purchasing, sales, marketing, computer and technology law, employment law and day to day legal matters. Let us provide your company the advice and guidance you need.