Tuesday, October 23, 2012

NEGOTIATING THE FORCE MAJEURE CLAUSE

Many contracts have standard "boilerplate" provisions in them, which serve the purpose of detailing rights and obligations common to most contractual situations, and also justify the big firms in sending you a four thousand page contract when you want to sell your bicycle to one of their high paying clients.

One of the common boilerplate provisions, is what is known as the "Force Majeure" clause, which you may think of as hey it ain't our fault that a war broke out during the earthquake which occured during the power failure while the electromagnetic pulse weapon went off.

The clause excludes contractual liability of a party (actually it should be the parties) in the situation of the occurence of CERTAIN unforseen events BEYOND THE PARTY'S CONTROL. Terrorist attacks for example. War. (One of the reasons they quickly shut up George W. during the first days after 9/11 when he kept saying "act of war" was it might exempt insurance companies from paying off under a force majueure clause. But he never was accused of being overly bright).

So think of the evil wicked kind of stuff that happens when either Mother Nature or Human Nature gets really pissed of at us and brings war, flood, planes crashing into your bedroom, earthquakes, flying saucers abducting your poodle--stuff like that for force majeure.

You want to BE CAREFUL when negotiating this clause--in fact many knuckleheads out there just glance through it with the idea of "what the Hell, it's just boilerplate."

First, make sure it applies to both sides. Next, make sure it doesn't deal with the financial condition or negligence of a party. Not labor, computer, software, or distributor problems either.

Let's take an example. You order one thousand widgets from Wonder Widget Inc.  Before they ship from the plant, the plant is destroyed by the Purple Death Ray launched by Emperor Ming from the planet Mongo. Okay, that's force majeure, and WWI gets off.  But if Wonder has a problem where the gloppeta gloppeta machine broke down and they can't manufacture the widgets--too bad Wonder, that's your problem, your machine, not any kind of deus ex machina type stuff.

Bottom line:  Boilerplate provisions can and should be modified by an intelligent businessman and his attorney. The old line "it's just boilerplate" is just some much business bullshit.

Monday, September 17, 2012

NON-COMPETE NON-DISCLOSURE AGREEMENTS

Depending on the job, you may want to have your new employee sign a non-compete non-disclosure agreement.  Are they enforceable? Depends on the terms, depends on the state you are in, and depends on how effing stupid the judge is you get when you are trying to enforce it. HOWEVER, it is still a good idea to have one, as it increases the chances of enforcement when there is something in existence to enforce. You may be exposing the new employee to secret formulae, hard to get customer lists, marketing methods, the secret of your grandmother's egg salad recipe--something that you don't want your competitors to have. Have them sign what is called in the biz the NDA--the non-disclosure agreement.  If they turn rat, they turn judgment debtor and have to pay up and with a properly drafted agreement, they also have to shut up, or face contempt of court charges which could have them living in a gated community sans golf course--if you catch my drift. FURTHERMORE, you may be spending a ton training the new guy on the block, and you don't want him going to school on you then setting up shop on his own or with a competitor--so you need the non compete agreement.  Facing a situation like this? If you are in New York, get a hold of me and we'll talk.
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Tuesday, September 11, 2012

DO YOU NEED A PARTNER?

I have found in 31 years of practice, that even seasoned entrepreneurs are more open to bringing in a partner or a shareholder or a member, when needing a certain skill set under their control from a person who is not likely to be satisfied being an employee. I tell them all don't do it.  If you need that certain skill set, make them an independent contractor, or at worst, create a joint venture.  To offer ownership in your enterprise is to offer a whole set of legal rights you might not want to give up.  In short, instead of buying the person, lease him/her.

Thursday, June 28, 2012

OBAMA HEALTH CARE LAW RULED CONSTITUTIONAL

What does it mean to the small business owner? If your business has less than 25 full time employees and pays at least 1/2 of your employees' health insuranc premiums, you can get a tax credit equal to 35% of contributions. In 2014 it goes up to 50%. If you have 50 or more full time employees and don't provide health insurance coverage for them, you pay a penalty of $2,000 for each full time employee in excess of 30 ful time employees.  (Hey, that's cheaper than health insurance, isn't it?)  So, Creeping Socialism creeps on in this administration.  How about we all do our part to have Obama become unemployed next year?

Friday, June 8, 2012

MEMCON--MEMO OF CONVERSATION

You never know when a business record may be of crucial importance in commercial litigation.  Sooner or later any commercial establishment will find itself in litigation.  So, let us wax eloquent on the MEMCON--or the memo of conversation.  What the hell is this?  You have a phone discussion with someone regarding a deal, or a complaint, or just about anything, after the convo, you write a summary of who said what to whom.  That is your MEMCON, and it can be allowed in a trial as a business record, as long as it is the regular course of your business to make MEMCONs, it was made in the regular course of business, and was created on or about the time of the conversation memorialized.  Dig your well before you are thirsty, and start using MEMCONs as a regular business practice. You'll be glad you did.

Monday, June 4, 2012

INVOICE MORE OFTEN

Billing just once a month and not getting paid and then waiting another month to bill again?  Boo on you!
Bill as soon as the work is performed, bill two weeks later, and then if you don't get paid at the end of the month, give them a call, and if necessary keep billing every two weeks until you are paid, or until you sue the bastards.  Bill more often, get paid more often. Sound good?

Wednesday, May 30, 2012

SHAREHOLDER/OPERATING AGREEMENTS

Whether you are a shareholder of a corporation or a member of an LLC, you need to have a shareholder agreement or operating agreement to explain the rights and obligations of the co-owners.  Absent such an agreement, you can expect trouble and expense when somebody wants to sell, or when somebody dies.  Time and time again, I have seen business people put off drafting and executing such agreements, and time after time, I have seen those with no agreements wind up in expensive and time consuming litigation to have a court determine what their respective rights are.  Bad idea.