The Value of a Written Contract

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This article. written by Austin K. Sweet, Esq. appeared in Northern Nevada Business Weekly on September 15, 2014. 

One of the advantages of conducting business in Northern Nevada is that our relatively close community necessitates a certain level of accountability. Establishing a reputation for following through on your word can take you a long way in Northern Nevada, while proving otherwise can ruin a business or career. Because of this mentality, many Nevada business-owners resist written contracts and prefer to rely on the “handshake deal.” However, reducing your agreements to writing is always a wise decision for a number of reasons.

Miscommunications Happen and Memories Aren’t Perfect.

Subject to a few major exceptions, which will be discussed below, oral agreements are legally enforceable contracts. In practice, however, oral contracts can be very difficult to enforce because they necessarily lack physical evidence of the agreed upon terms. In other words, it’s much easier to prove the terms of a contract if you can print the contract out and show it to someone. Without tangible evidence to show a judge or jury, any dispute will boil down to your word against theirs. This can become exponentially problematic when both parties honestly believe they are telling the truth, either because the parties misunderstood the agreement from the outset or because one of the parties misremembered the deal.

Regardless of how strongly you trust the person you are dealing with, creating a written record of your agreement prevents miscommunication and protects against the dangers of human memories. Even good relationships between honest people can go awry when the two sides honestly remember the agreement differently. This situation can easily be avoided by simply writing down the terms of the agreement and giving both parties a copy. As the saying goes: “Trust, but verify.”

Not All Oral Contracts Are Enforceable.

The general rule that oral contracts are legally enforceable is subject to a few major exceptions, primarily encompassed under the Statute of Frauds. Contracts which fall under the Statute of Frauds are generally unenforceable unless they are written. The main types of contracts subject to the Statute of Frauds are contracts relating to real property, contracts for the sale of goods worth more than $500, and contracts which cannot, by their very terms, be performed within one year. You should always put these types of contracts in writing or you may not be able to enforce them.

The Statute of Frauds contains a number of exceptions and nuances. Rather than attempt to determine whether your particular agreement needs to be in writing, it is good practice to simply put all agreements in writing and avoid a problem with the Statute of Frauds.

A Written Contract Is Only Beneficial If It Is Accurate.

A contract is like an insurance policy – (1) you hope you never need to use it, but if you do, it had better cover what you need covered, and (2) it is worthless unless you put it in place before trouble arises. Simply having a contract is not good enough; it must be clear, accurately reflect the agreement, and include all necessary terms. Drafting a good contract while all parties are cooperating is much easier than attempting to interpret a vague, inaccurate, or incomplete contract after a dispute arises.

Contracts need not be long, complex documents full of legal jargon. A multi-million dollar contract can be hand-written on a single sheet of paper, so long as the correct terms are included. Written contracts need to include all essential terms of the deal (price, terms, dates, deadlines, etc.) and everyone’s signature. Be sure that any critical element of the agreement is included in the contract – do not rely upon any promises from the other party that are not included in your contract.

All good written contracts should also include provisions concerning how disputes under the contract will be resolved, such as whether you agree to arbitration, which state’s laws apply, and in which court any disputes should be decided. It is also important to include an attorneys’ fees provision, allowing the prevailing party in any dispute to recover its attorneys’ fees and costs if a dispute arises.

Understand What Your Contract Requires.

It is absolutely vital that you understand everything in your contract. It may be tempting to download a template off the internet, change parts of it to apply to your situation, and leave the several remaining pages of legal mumbo-jumbo because it “sounds good.”

I have seen contracts between local businesses that require them to file suit in places like Florida. I have seen contracts that include superfluous provisions that have absolutely no applicability to the actual agreement at hand. I have seen contracts that include applicable, important requirements that neither party was enforcing because neither party understood their obligations. In some such cases, the parties would have been better off with no contract whatsoever than to have used a contract that included language that the parties did not understand.

Having a contract with provisions you do not understand can actually impede your ability to enforce your agreement. For example, you may be in breach of the contract without even realizing it, opening yourself up to liability or providing the other party with defenses they might not otherwise have. If you are not sure what a provision in your contract means or requires of you, consult with an attorney before signing.

Understand What A Contract Can and Cannot Do.

You can’t make good deals with bad people. No matter how iron-clad your contract is, it will not protect you from the improper dealings of dishonest people. What a good contract can do, however, is deter the other party from manufacturing a dispute they are unlikely to win. A good contract can also maximize your ability to resolve any dispute as quickly and inexpensively as possible.

A “loophole” in a contract may be enough for a defaulting party to drag a dispute through the legal process for several years at great expense to everyone involved, while a well-litigated dispute over an iron-clad contract can be resolved much more efficiently. While a good contract may not prevent a lawsuit, it can minimize the time and cost of a lawsuit.

Consult With a Lawyer.

In order to ensure that you have an accurate, complete contract that you fully understand, it is wise to meet with a lawyer before signing the agreement. Your lawyer can help you verify that your contract includes all necessary terms and appropriately applies to your situation, as well as explain to you all your rights and responsibilities.

If you are concerned with the cost, considering drafting the contract yourself, then sitting down with your lawyer to discuss any revisions that need to be made. The Gunderson Law Firm, for example, will review any unsigned contract and offer our comments, concerns, and advice free of charge for our existing clients. If your attorney offers a similar service, do not hesitate to utilize it and protect yourself and your business to the best of your ability.

Austin Sweet is an attorney at Gunderson Law Firm, practicing business law directed at helping business owners stay protected and prosper. He can be contacted at (775) 829-1222 or asweet@gundersonlaw.com.

 

So Your Client has a Judgment; Now What?

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Compensation for your client does not end with a judgment; it only ends when your client has successfully executed on that judgment by realizing a monetary return. Many attorneys consider a successful jury verdict, or the granting of a motion for summary judgment, to be the victory for their client. However, most clients have a sense of lasting victory only after they are actually paid what they are owed. Thus, the question becomes: so your client has a judgment; now what?

Read the full article at Nevada Lawyer Magazine.

My New Business: Do I Really Need a Lawyer?

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Starting a new business can be daunting. You already have a great idea, but now you’re making that idea a reality. You’re meeting with financial backers, signing a lease, hiring employees – and everywhere you turn, you’re spending more money. With so many expenses to juggle, many new entrepreneurs ask themselves: Do I really need a lawyer?

Although many people dread hiring a lawyer, investing a small amount of time with a lawyer at the beginning can help save you a huge amount of money and difficulty later on. There are several ways a lawyer can help your new business succeed:

Forming Your Business Entity

Corporation, partnership, LLC – what do they all mean, and how do I go about setting one up? A lawyer can help you navigate the intricacies of Nevada business formation and make sure that you are protecting yourself from personal liability. Do you have partners or investors? A lawyer will make sure your corporate documents clearly reflect exactly what your agreement with those partners or investors is so there’s no question about who is responsible for what. Even better, a lawyer can also help you anticipate the problems you never considered – so if those problems arise down the road, you’re already covered. Hiring a lawyer to form your company generally costs about the same as getting the documents from an online source, but with a lawyer you’ll know that you are getting a customized business entity designed just for you.

Negotiating and Reviewing Contracts:

Starting a new business involves a huge amount of paperwork. Everyone wants you to sign a contract, from your investors to your vendors and your new landlord. Are these terms normal, or are they asking you to sign something totally over-the-top? Which terms are negotiable, and what does all this legalese really mean? A lawyer can help make sense of these contracts and can step in to negotiate on your behalf if you’d prefer to stay out of it. Need a release for your customers to sign? How about a non-compete agreement with your new employees? Your lawyer can draw up these contracts for you to make sure they say exactly what you need them to say – and that they comply with Nevada law.

Everyday Business Needs

Can I ask my employees to wear a specific uniform? What kind of work can I have an intern perform? Should I trademark my company name? Once your business is up and running, there are plenty of small questions that will pop up from time to time. Trying to research these questions on your own can be tricky, but hiring a new lawyer just to ask a small question can seem like overkill. This is where having a relationship with a lawyer can be a huge asset. Since she already helped set up your business, your lawyer knows you and your business’s needs. With only a quick call or email, your lawyer will be able to answer any questions that may come up. This will let you focus on running your business without having to worry about these minor legal issues.

 

For additional information and to learn more about Gunderson Law Firm www.gundersonlaw.com or call (775) 829-1222

Article published in the Reno Tahoe YPN newsletter. 

Austin Sweet Joins Solace Tree Board of Directors

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Austin Sweet has joined theSolace Tree Board of Directors. Sweet is an attorney with Gunderson Law Firm, who has represented a wide variety of clients from across Nevada, California and the nation. His primary clientele includes individuals and businesses on a local, regional, and national level, as well as a variety of public agencies.

“We’re excited to have Austin join us as we celebrate our tenth anniversary this year,” said Solace Tree Board Chair Dave Wertzberger. “His skills and enthusiasm will be a great addition in our mission to help evenmore families find hope and healing after losing a family member.”

A 501c (3) non-profit organization based in Reno, Nevada, the Solace Tree is celebrating its tenth year of providing peer support, information and education to schools and the community to promote healing and recovery for grieving children, teens and their families who are affected by loss. For more information, visit www.solacetree.org.

 

 

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Gunderson Law Firm Featured in RGJ’s Annual Corporate Giving List For 2013

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To review a complete list of businesses featured in this Corporate Giving list, click here.

Gunderson Law Firm Hosts Donation Drive Benefiting Casa de Vida in Reno

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Gunderson Law Firm is hosting a clothing donation drive benefiting Casa de Vida in Reno. New and/or gently used baby items can be delivered to the Firm’s office during regular business hours. Specifically, the organization is in most need of winter clothing, sizes infant to 5T. Casa de Vida provides a home and support services for pregnant young women in our community. Donation drive ends December 20, 2013.

During donation season small children and infant donations can often be overlooked, and with winter just starting, warm clothing and coats are more important that ever. Join us in helping provide the necessary winter items for infants and small children. Donations can be dropped off Monday-Friday, 8:30am to 5:00pm:

Gunderson Law Firm

3895 Warren Way

Reno, NV 89509