Contracts

Series | Understanding Contract Terms

In this iVLG blog series, we take common terms you see in your business contracts and help break them down, so you can understand what exactly the terms mean, the role of each term in your contract, and how to explain to the other side why the term makes sense.

We know that reading a contract can be a daunting task, especially when it’s full of words you may not have seen or don’t fully understand. Our goal is to help you understand why contracts include the “boilerplate” terms and how those terms may affect your business. Next time you sign on the dotted line, you’ll know exactly what you’re agreeing to.

The understanding contract terms series will breakdown the following contract...

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Contracts

How to Position Yourself to Win a Contract Dispute

Yesterday the Washington Court of Appeals released an opinion providing a good example of how you can position yourself to win a contract dispute. The opinion affirmed a summary judgment awarding more than $300,000 plus fees and interest to GLV International, Inc. against American Rodsmiths, Inc. and its president Robert Scherer.

The Facts of the Case American Rodsmiths purchased more than $300,000 in goods from GLV. American Rodsmiths then failed to pay its outstanding balance. GLV extended credit to American Rodsmiths based on a personal guaranty from the company president, Mr. Scherer. The personal guaranty included a provision awarding attorney fees to GLV if it prevailed in a suit against Mr. Scherer to enforce the terms of the personal guaranty. GLV offered...

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Contracts

Understanding Contract Terms (post 6): Arbitration

As is the case with all the terms we discuss in this series, you have likely run across the term arbitration in a number of contracts. You also probably have a vague idea of what arbitration is. Today’s post will give you a better understanding of why contracts include an arbitration clause, including some of the benefits and drawbacks to using arbitration instead of the traditional litigation process.

First things first, let’s explore the definition of arbitration. Webster’s Dictionary defines arbitration as the hearing and determination of a case in controversy by an arbiter. Essentially, when a dispute arises between two parties, the case is brought before a neutral third party (the arbitrator), and each side presents its side of the...

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Contracts

Understanding Contract Terms (post 5): Conditions Precedent

In this latest post in our series on understanding contract terms, we’re tackling conditions precedent. Below is the definition and explanation of how conditions precedent affect your contracts.

A condition precedent is an event which must take place before a party to a contract must perform or do their part. For example, you agree to paint a house if the owner of the house supplies the paint. Until the paint is supplied, you’re not required to (or able to) paint.

If a condition precedent does not occur, no duty of performance arises and no payment is required. Furthermore, the party protected by the condition is not in breach when that party does not perform his or her part of the contract.

Use in...

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Contracts

Understanding Contract Terms (post 4): Force Majeure

In today’s post, we continue our series on understanding contract terms. In this fourth post, we focus on the term force majeure.

Webster’s Dictionary defines force majeure as “an event or effect that cannot be reasonably anticipated or controlled”—for example, such as hurricane, flooding, earthquake, war, riots, etc. The term is French, and is translated to mean “superior force.”

This term is included in contracts as a way to relieve each parties’ liability or obligation when an extraordinary event occurs or circumstances arise that are beyond the control of the parties and prevent one or both of the parties from satisfying their obligations under the contract. It is most commonly used in insurance, construction, and supply contracts.

Typically, the force majeure clause does...

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Contracts

Understanding Contract Terms (post 3): Severability

In just about every contract you’ll come across, you’ll see the term severability somewhere in the last few paragraphs of the contract. It’s one of those ‘boiler plate’ clauses that most people glance right over when they’re reviewing a contract. However, the effects of this clause are worth reviewing and understanding. In today’s post, the third in our series on understanding contract terms, we explore the definition of severability, and how it may affect your business.

Webster’s Dictionary defines severability as “capable of being divided into legally independent rights or obligations.” Finally, we have a Webster’s definition we can work with. At the root of the definition is the idea of dividing something into parts.

In contract terms, this clause refers to...

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Contracts

Understanding Contract Terms (post 2): Indemnification

Last week we started a new contracts series where we explore common terms you see in various contracts and break them down so you can understand exactly what the term means, and its role in your contract. Today’s post will look into the definition of indemnification.

Webster’s Dictionary defines indemnification as “the action of indemnifying” or “the condition of being indemnified,” which is far from helpful. To indemnify is to “secure against hurt, loss, or damage.” Now we’re getting somewhere.

In simple terms, a typical indemnification clause allows you to seek reimbursement for money that you are forced to pay to a third party as a result of injuries or property loss caused by another person’s actions. For example, let’s say that...

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Contracts

Understanding Contract Terms (post 1): Goodwill

In a new series on the iVLG blog, we’ll take common terms you see in various contracts and break them down so you can understand what exactly the term means, and its role in your contract. In today’s post, we’ll look into the definition of goodwill.

Webster’s Dictionary defines goodwill (in terms of business) as:

(1) the favor or advantage that a business has acquired especially through its brands and its good reputation (2) : the value of projected earnings increases of a business especially as part of its purchase price (3) : the excess of the purchase price of a company over its book value which represents the value of goodwill as an intangible asset for accounting purposes

Successful businesses build a strong brand name, good...

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Contracts

Social Media Legal Issues: (Post Number 7): Protect Your Business from Rogue Social Media Contracts

Business owners and their employees often deal with contractual relationships in the course of running almost every type of business.

Though lawyers almost always advise against it, business people often form unwritten “handshake” deals with partners, suppliers, competitors, and customers. Many an unscrupulous business person has been “saved” by the fact that the deal to which he agreed was not in writing. Similarly, many managers have been “saved” by the fact that the oral promises their employees made were not easily enforceable.

The age of social media, for better or for worse, will make it more difficult for business owners who do not properly educate themselves and their employees regarding “contracts” to evade the consequences of thoughtless agreements. And thoughtless agreements will...

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Business Startup

Key Term Sheet Provisions: Wrapping Up the Series

This is the final installment in our key term sheet provisions series. This post reviews rights of first refusal, restrictions on sales, voting rights, proprietary information and inventions agreements, co-sale agreements, founders activities, no shop agreements, and indemnification provisions.

Right of First Refusal The right of first refusal provision grants investors a right to participate in subsequent stock offerings. This right is sometimes called a pro rata right, because it enables investors to participate pro-rata. Pro rata means proportional, and in this context means that an investor can purchase an amount of new stock proportionate to their holdings in the company immediately prior to the issuance of the new offering. In more simple terms, it means that if an investor has 5%...

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