Contracts – Four Provisions that may Make or Break Your Deals

By Joe Fournier

The contractual provisions that are most important to you depend on a variety of factors, including, for example, your industry, your company’s ownership structure, and your company’s size, maturity, and geographic location. However, the following four provisions are universally important and are the areas where I am asked to assist most often.

1. Limitation of Liability and Indemnification

This provision may not only make or break a deal but also, if not drafted properly, your company’s existence, especially if you do not realize that you are on the hook for a full indemnification or for damages that are beyond your control. A proper limitation may protect you from excessive liability, help you secure adequate liability insurance, and allow you to price deals competitively. Opposing lawyers will use many sneaky tricks in this area, and it is important to have someone on your side that can negotiate a position that protects you.

2. Termination

Most contracts will include language regarding termination after the lapse of time, for a breach, or upon project completion. Depending on the circumstances, it is typically better and more protective for your company to ensure that terminations are only “for cause” or upon breaches that are material in nature. Additionally, it may be important to insert reasonable notice and cure periods.

3. Works for Hire

Works for hire language often scares our clients because they are – understandably – afraid to give up any intellectual property rights. On the other hand, it is often reasonable for your customers to expect that they will own the output for which they are paying. Accordingly, it is important to make sure this is ALL they own, and we can help you draft provisions that accomplish this objective for you by protecting your IP rights.

4. Payment Terms and Timing

The service provider typically wants to get paid sooner, and the customer typically wants to extend the terms. We can help you find a middle ground here. Additionally, it is important to (a) ensure that project milestones are clear and objective and (b) build language into the contract that, in the face of a dispute, ensures your customers pay at least a portion of your invoices.