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Massachusetts Lawyer Preparing Small Business Contracts and Agreements

The Katz Law Group has nearly 40 years of experience in preparing contracts and agreements for small businesses in Massachusetts. From our extensive contract and business litigation and trial experience, we have gained the necessary business judgment and savvy to know what kinds of agreements will work for your business in the real business world. Having a comprehensive, well planned agreement in the beginning can protect your business and help avoid litigation in the future, all while protecting your business' brand.

However, even the most carefully planned agreements cannot and will not protect your small business against every legal dispute. If and when a dispute occurs, we stand ready to protect your interests and will work to resolve your contract issues as efficiently as possible until resolution.

Drafting and Preparing Contracts for All Types of Small Businesses

With the right legal counsel, your small business can gain from our real-world experience as business litigators who have repeatedly seen how poorly-drafted contracts can cost companies both time and money. The types of business contracts and agreements your company needs will depend on a number of factors, including the size, industry, and projected growth of your business. Each situation and small business client presents different challenges and thus different agreements are needed to meet those various challenges. The Katz Law Group can help your company prepare all types of contracts and agreements for small businesses, including:

It is crucial to understand what these contracts and agreements need to include to protect you and your company from liability and represent your best interests. Here are some of the most common contracts and agreements that small businesses encounter.

Executive Agreements

Executive agreements are employment contracts for high-level company executives. Employers want to provide terms and benefits to attract top-talent, while executives are looking to get the best financial deal possible for that particular position. Employers and executives can be optimistic while negotiating an executive contract but must consider, at the same time, what could happen if the relationship deteriorates.

Issues that need to be covered in an executive contract include:

  • Compensation
  • Benefits
  • Equity terms
  • Job expectations
  • Bonus structure
  • Severance terms
  • Non-compete and non-severance
  • Confidentiality
  • Dispute resolution provisions

When drafting an executive agreement, employers need to consider all contingencies to make sure their interests are protected. While there is always a presumption that any new executive will work out, most weaknesses in executive agreements are exposed when the executive fails to meet expectations. Problems with an executive agreement can make it difficult to terminate the executive or, alternatively, require a hefty payout to the employee as the only way out of the contract.

The Katz Law Group can help you prepare and negotiate a solid executive agreement that provides the right protection for your small business. Making sure the right language is included in any agreement of this type is essential to any business relationship. Each agreement should also protect your company particularly in those situations where an executive has access to the sensitive materials, trade secrets, or valuable sales information that your small business relies upon. In the event that the executive leaves the company or is terminated, the agreement should clearly delineate the rights and liabilities of all of the parties as well as making sure that the employee is not profiting from poor performance at the expense of your company.

Franchise Agreements and Contracts

A franchise agreement is a contract between the franchisor and franchisee usually to operate a franchise business under another business's name. This is especially common for restaurants, service companies, or product distribution businesses. Franchise agreements create an ongoing relationship between the company and the franchisee. There may also be federal and state laws requiring certain information and disclosures in franchise documents to avoid government penalties. Under federal law, there are specific requirements for Franchise Disclosure Documents (FDDs).

These documents need to address all the issues of potential franchise litigation and disputes so your company does not find itself in court facing unexpected damages. Franchise agreements may cover a number of issues, including:

  • Mandatory disclosures
  • Party relationship
  • Objectives and obligations
  • Ownership delineation
  • Territory definitions
  • Trade name
  • Licensing rights
  • Payments
  • Confidentiality and non-compete
  • Indemnification
  • Termination provisions
  • Severance terms
  • Right to renew

Nondisclosure, Non-compete, and Unfair Competition Agreements

Nondisclosure and non-compete clauses are quite common in small business contracts. A nondisclosure agreement (NDA) is a contract that relates to confidential material, such as trade secrets, intellectual property, or proprietary information. A non-compete clause (NCC) or unfair competition agreement generally provides that one party agrees not to enter into a similar position or start a similar company that would compete with your small business. 

Non-compete and nondisclosure agreements are generally used to protect employers and safeguard the company's property and market position. Many small businesses include NDAs and NCCs as a matter of course in just about all of their contracts. However, just because your documents have nondisclosure and non-compete agreements does not mean that your company is protected: If poorly written, these agreements may not be enforceable.

The unenforceability of contract terms and provisions can be one of the biggest surprises for small businesses who expected the clear language of the contract to protect their interests. Experienced business contract litigators, such as the Katz Law Group, understand what kind of terms can render a non-compete or non-disclosure contract unenforceable. They can help your small business create enforceable non-compete and non-disclosure provisions.

Equipment Contracts and Equipment Finance Agreements

Equipment contracts and equipment finance agreements are important for many small businesses, both at the early stages of the business and after they have become well-established. Many small business owners focus on the pricing and duration terms of equipment contracts and finance agreements without considering all the other issues that could arise when buying or leasing equipment.

Many equipment leases and purchase contracts are based on standard documents with boilerplate language. However, it is often in your best interest to negotiate these terms when possible. Important issues to consider in equipment contracts and leasing agreements include:

  • Equipment descriptions
  • Lease terms (annual, fixed-term, or month-to-month)
  • Lease-to-purchase provisions
  • Fees
  • Warranties
  • Interest rates
  • Termination
  • Usage limitations
  • Delivery and installation
  • Maintenance
  • Insurance
  • Guarantees

Disputes over the equipment lease agreement often involve equipment that fails to perform as promised. This includes slower performance, excessive non-conforming products, recurring breakdowns, delayed maintenance, and inconsistent output. These problems may not be enough for a business owner to justify terminating the lease. However, it may require adjusting the lease agreement to make up for the shortfalls.

Another potentially costly issue in equipment lease agreements has to do with indemnification when the equipment breaks or is damaged. An equipment contract should provide a clear delineation of which party is responsible when something goes wrong. This includes covering the cost of replacement or repair, who has the duty to repair, and who is responsible for any accidents or injuries involved in an equipment malfunction. Not accounting for these problems in the lease agreement can end up costing a small business thousands of dollars.

Promissory Notes

Most small businesses rely on loans or business credit to fund and operate their companies. This often involves a promissory note to a lender - a promise to pay back the money borrowed at a certain interest rate over a given period of time. A promissory note is an important component of many business and commercial loans. The specific structure and terms of any given promissory note can make a big difference in the overall success of operating your small business. The promissory note is utilized to provide security to a lender as a way of making sure the principal personally stands behind the underlying obligation of the business.

Promissory note structures may provide for amortized payments, monthly payments with a final balloon payment, interest-only payment with a final balloon payment, or final principal and interest payment. The important terms of a promissory note may include:

  • Loan amounts
  • Repayment amounts
  • Terms of repayment
  • Interest rates
  • Default provisions
  • Late-payment provisions
  • Security interests and collateral
  • Transferability
  • Acceleration clauses
  • Guarantors and guaranty
  • Prepayment terms

Credit Applications and Personal Guarantees

Getting funding for your small business may pivot entirely the acceptance or denial of your credit application. When establishing or continuing to operate your small business, you may only get one chance to convince a lender that your business is risk-worthy. The lender or guarantor will not only consider the financial risk but also the terms of the credit application to make sure their own financial interests are protected.

Personal guarantees may be required for small business loans, including loans backed by the Small Business Administration (SBA). A personal guarantee puts the borrower's personal property and assets at risk in the event of a default. Limited liability business structures, like an LLC, can provide some protection against personal liability. However, it is important to understand the limits of corporate structure when providing a personal guarantee to a lender or credit institution.

Additionally, part of the credit application process may include a review of the small business' other contracts and agreements to ensure the business owners have not exposed the company to excessive liability. Properly prepared and reviewed contracts and agreements can be an important factor in determining whether your business's credit application is approved.

Reviewing Existing Contracts, Addenda, and Modifications for Small Businesses

If you have any concerns about how your company's existing contracts may expose you to unnecessary liability, getting a contract reviewed by the Katz Law Group can highlight potential problems and help correct them, though it is even better to be proactive and have us review the agreement before it is signed.

The four big reasons for getting a contract reviewed are:

  1. It helps you understand what each provision does, how it impacts your interests, and how it fits into the larger agreement
  2. You can see how the agreement could pose a risk to your interests, should certain circumstances unfold
  3. There may be portions of the contract that are not legally enforceable and that you may not have to follow
  4. Your lawyer can offer negotiation tips for modifying the contract, if it has been signed already, or for making a counteroffer if it has not

Modifications to contracts and addenda are often just as important as the language in the original contract documents. A modification or amendment can change sections of a contract or affect the entire agreement. A poorly-prepared modification can erase the protections of a well-negotiated contract as well as create ambiguity between both documents. Generally, a contract addendum has to fulfill all of the requirements of a contract to be binding. Mistakes in the addendum can leave the addendum or modification later unenforceable which might cost your company money and exposing your small business to costly liability and financial exposure.

Taking these steps is especially important when there is a lot at stake. Purchase agreements that involve lots of money changing hands should be reviewed carefully before you sign them, as seemingly small details in the contract, like a risk of loss provision, can have a massive impact if certain things happen. Additionally, contracts that require long-term commitments between the parties, like a commercial lease, should be reviewed carefully to make sure that you are not agreeing to obligations that you will come to regret.

From Start-Ups to Established Companies

Every small business needs the protection and predictability provided by well-drafted, comprehensive contracts. New business ventures and start-ups often put off serious contract and agreement preparation and review or sometimes may never get around to undertaking any such effort. The reasons for failing to invest in contract review may be due to the fact that the company is short on money, does not anticipate any problems, is working based on promises between friends and family, or simply because the business is moving faster than the founders had anticipated. Nonetheless, the most important facet of the business is overlooked; namely, the creation of contracts and agreements to protect the legal and business interests of the company.

The Katz Law Group: Business Litigation Lawyers for Small Businesses Throughout Massachusetts

Unfortunately, many new small businesses are stalled or fail because of issues that could have been prevented through proper contract negotiation and preparation. Without the protections put in place by properly-drafted agreements, this could also potentially leave business owners personally liable for company debts and liabilities. Contact the Katz Law Group online or call their law office at (508) 480-8202 to make sure that you are protecting yourself and your small business with the right business contracts and agreements before you start doing business in Worcester, Marlborough, Framingham, or anywhere else in Massachusetts.

Even proven small businesses can benefit from an annual contract review of new and established policies and contracts. As every business owner knows, the laws change every year at the federal, state, and local levels. A regular review of your standard contracts is what we at the Katz Law Group like to call a "contract tune-up" and should be done yearly in order to capture any changes that affect your business or industry.

With our many years of experience as litigators in business and contract disputes, we understand the importance of a well-drafted contract and our experience has encompassed having seen the consequences of poorly drafted agreements by other legal counsel. Getting the right contract prepared the first time will help your small business avoid unnecessary litigation that could otherwise derail your company's productivity and progress. The most comprehensive business contracts are designed to provide for every contingency in order to provide a small business with peace of mind knowing that your legal and business interests are well protected.

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