CONTRACTS 101  WHAT YOU NEED TO KNOW TO PROTECT YOURSELF  PART TWO OF THREE PARTS 

 

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VI.CONTINGENCIESThe best laid schemes of mice and men often go astray.” Robert Burns.

It is impossible to come up with a list of all possible things that can go wrong, but a good contract should try and foresee and provide for as many issues as possible.  Here are some you may want to address in specific paragraphs within your contract: 

a. Quality Issues

  • Client doesn’t like quality of the services at all.  This can be subjective.
  • Client likes the services, (example: the photo is a good likeness, but it’s out of focus, too dark, too light), so the quality is not good or the medium is poor, e.g. a bad canvas or paper, etc.).
  • Businessperson is not in good physical health due to illness, substance abuse, and/or doesn’t do a good job, or the quality is mixed.
  • Client is not in good shape due to health issues, substance abuse or other life issues (i.e. death in family, etc.), and can’t fully perform his/her duties.

Example:  A recent client had an allergy attack while performing one-to-one personal services.  The client refused to pay for the session, as she felt the coach was not 100% present during the session.

b.Time issues

  • Businessperson shows up late, misses some of the appointment.  This could be critical in a one-of-a-kind event, such as a first communion, or a wedding where either the photographer or a vendor providing food, flowers or a wedding cake comes too late.
  • Businessperson/assistants don’t show up at all.
  • Client shows up late, businessperson can’t stay for whole session due to other bookings.
  • Client doesn’t show at all, doesn’t call.

c.Personnel/Human issues

  • Difficult Client/customer – no one or nothing is pleasing to him/her.
  • Businessperson/assistant is hurt or gets sick on job, cannot complete some or all of entire assignment.
  • Client or businessperson is hurt performing services (roofer falls off the ladder).
  • Client gets sick and can’t make the appointment or complete the purchase.
  • Company cancels due to client not being available on scheduled date.
  • All other personal issues.

d.Money issues

  • Client has paid up front, wants some or all of money back because of:
  • Quality- not satisfied with work.
  • Businessperson doesn’t show.
  • Businessperson is late, missing some of the appointment.
  • Other.

2.Client hasn’t paid for all of the session, refuses to pay after session is over or because businessperson doesn’t show up or is late, or client doesn’t like the goods or services.

3.Who gets to keep how much of a deposit in the event of a breach of the contract or dissatisfaction with the work quality?

4.Does the businessperson guarantee the work or the goods?  If so, specify for how long.

VII. EVENTS OF DEFAULT.What constitutes a breach of the contract?  Some typical examples are:

a.Non-payment for goods or services.

b.Failure to show up when scheduled.

c.Incompetent work.

d.Person contracting lacks authority to do so.

e.Not adhering to contract provisions.

f.Other.

VIII.DISPUTE RESOLUTION.  All contracts should have some provision for resolving disputes if they arise.  The three most common forms are: litigation, mediation and arbitration.  Some contracts call for mandatory mediation before any other steps can be taken.  This dispute resolution clause should also discuss who pays for attorney’s fees and dispute resolution costs (typically the prevailing Party gets reimbursed for attorney’s fees and costs, but it must be spelled out in the contract).  Additionally, you may want to limit the time for bringing disputes to not more than one year after the service is rendered or the goods provided (or some other  time frame that makes sense).  Otherwise you will be subject to California statutes of limitation.

a.Litigation (i.e. suing the other Party in court)

Because courts have cut back substantially on staffing, it is taking several years to get into civil court after a lawsuit is filed.  Regardless of this, the cost of suing a Party is generally going to be significantly more than the cost of the contract (think $50,000-$100,000). This type of resolution usually makes sense if you have an attorney’s fee provision in your contract and a very strong case.

b.Mediation

Mediation involves a third Party neutral, called a mediator, who assists the disputing Parties to a resolution that the Parties themselves fashion, though active listening, providing feedback and giving both Parties a chance to be heard by the other Party.  It may be binding or non-binding.  If a binding agreement is reached, a mediation agreement is signed by the Parties and will be binding in court in the event one Party does not adhere to the Agreement.

c.Arbitration

Arbitration involves a third Party neutral, called an arbitrator, who hears testimony from the disputing Parties and makes a decision, just as in litigation.  Arbitrators are typically retired judges or attorneys who often do a lot of litigation.  Depending on the arbitration clause in the contract, the arbitrator may or may not use California law to determine the case.  Just as in court, the arbitrator usually hears evidence and testimony from the Parties and their attorneys, and makes a decision as to who wins, and how much they receive.  Unless otherwise specified in the contract, arbitration decisions are final and not appealable.  Your contract should have an arbitration clause that specifies the choice of law, type of evidence that is acceptable, and whether the decision is appealable.

IX.VENUE/CHOICE OF LAW FOR DISPUTE RESOLUTION. This is often forgotten in contracts.  Be sure your contract specifies that you want to have your dispute heard in the most convenient place for you, and specify the state law that you want to use.

Example:  You are a wedding photographer, and a local couple flies you to Vancouver. B.C., Canada for the wedding, because the client/customer is from Vancouver.  In the event of a dispute over money, you don’t want to be flying to Vancouver to appear in court.  Specify that any court action, arbitration or mediation shall take place in San Francisco, CA and shall use California law to resolve the dispute.  Otherwise, you could be subject to Canadian law, in this example.

X.LIQUIDATED DAMAGES CLAUSESThe purpose of a liquidated damages clause is to establish a dollar value that both Parties agree when they sign the contract that shall be paid to a contracting Party in the event of certain breaches of the contract. It is used when it may be difficult to determine an exact amount that should be paid to the non-breaching Party, based on the nature of the breach.  This is very common where the item being purchased is unique, such as real estate or art.

Example:  A groom doesn’t show up for the wedding, but the photographer or other vendor has given up other jobs for that day, and spent several hours at the venue, incurring costs for equipment, film, personnel, food, transportation, and cannot take photos because no wedding takes place.  How much of the deposit does the photographer get to keep?  Alternatively, the photographer gets sick at the last minute, cannot come to the wedding, and doesn’t have a stand-in.  What is the value to the marrying couple for having no photos of their wedding?  Both these eventualities should be spelled out in the contract, and ideally the photographer got enough of a deposit up front so that he doesn’t have to go after the bride or her family, who will be very upset and likely not want to pay for something they didn’t get.

XI.ATTORNEY’S FEE PROVISIONSIn the event you have to go to court, arbitration or mediation, make sure your contract has a provision for you to get reimbursed for costs, attorney’s fees, etc., if you are the prevailing Party.  If you fail to do this, your attorney’s fees may be significantly more than the fees you recover from your client.

Example: Some typical language might be as follows:  In the event any dispute between the Parties to this Agreement should result in litigation or other legal proceeding, the prevailing Party shall be reimbursed by the non-prevailing Party for all reasonable costs and expenses, including, without limitation, reasonable attorney’s fees incurred by the prevailing Party in connection with such litigation or other proceeding, and any appeal thereof.  Such costs, expenses and fees shall be included in and made a part of the judgment recovered by the prevailing Party, if any.

XII.LEGAL/INTELLECTUAL PROPERTY ISSUESSome additional issues that should be addressed by the contract include:

a.Online contracts

1.How does the other Party accept them?

2.How does the businessperson confirm acceptance?

b.Paper contracts

1.Include mail and email acceptances.

c.Rights to the photos, artwork or branding

1.Who owns the rights to these?

2.Are they licensed or owned?

d.Trademark/copyright issues

1.Does your product/service infringe on anyone else’s trademark, trade dress or service mark?

XIII.REMEDIES. What happens to the innocent Party when one Party fails to perform under the contract or only partly performs?

Example: Businessperson gets to keep a portion (or all) of the deposit if the appointment has to be rescheduled at the last minute.  Doctors do this all the time.  Client gets a refund of his/her money if businessperson fails to show, and the appointment cannot be rescheduled, such as a special church service, birthday party, etc.

 

Need help with drafting, review or negotiation of a contract? Nancy Lewellen can help you do this with ease.  Contact her today at nyl@palladianlawgroup.com or 415-399-0993 for a free 15-minute consultation.

 

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