By Paul O. Lopez, Esq.
Corporate litigators are known for skillfully and persuasively advocating on behalf of their clients. Yet their greatest achievement is often preventing disputes from ever reaching a courtroom or mediation table.
Well-drafted and reviewed documents, saying little in digital correspondence that could later be construed as terms of an agreement, and keeping the legal team advised of potential issues can help avoid situations that could spark litigation.The following steps can help avoid contractual conflicts…
- Know your goal — and potential partner. Know your goal in any relationship or agreement to help ensure the intent is met. Perform due diligence into your potential partner organization and its principals regarding reputation, any history of litigation or judgments against them, even their vendors or client relationships. Never conduct business on a “handshake,” and only do deals with authorized decision-makers.
- Form the correct corporate entity and leadership roles. The structure of an organization — from the entity itself (whether a C Corp, an S Corp, or an LLC or LLP, for example) to the role of its principals — can provide tax advantages and flexibility and insulate partners or shareholders as relationships evolve or issues arise. Revisit the business structure semi-annually. Additionally, general operator’s insurance policies can help insulate principals, directors, or officers from exposure and liability.
- Write clear contracts. Well-written and precise contracts clearly set forth obligations and expectations. They should explicitly and clearly state how parties will operate, and “integration and merger” clauses should state that no amendments made orally or in writing are enforceable unless signed by the parties.
- Avoid emails with loose language or perceived promises. The vast majority of disputes involve breach of contract; most of those can be traced back to email communications that opened doors to contract interpretation or perceived amendments. Parties often assume what’s written or “offered” in an email is a de facto agreement or amendment. Along with the contract’s integration and merger clause, any correspondence involving agreements should include a disclaimer making clear that no terms or offers are in effect until a deal has been signed by both parties.
- Keep your legal team informed if issues arise. Even with finely crafted agreements, situations arise. Partners may question others’ intentions, or the relationship itself. If you get a sense that a relationship is souring or questions are being raised by your team or your partners, apprising company or outside counsel early may de-escalate matters.
Finally, your in-house counsel and/or corporate transactional lawyers should review any contracts or operating or shareholder agreements once in draft form. In the digital age, business opportunities can go from idea to presumed partnership in a few keystrokes. An ounce of prevention can make clear all parties’ intentions — and help avoid conflicts that can result in litigation and financial exposure.
For more than 50 years, Tripp Scott has played a leadership role in issues that impact business.
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Paul O. Lopez is president and COO of Tripp Scott and chair of the firm’s Litigation Department. With 32 years’ experience, he focuses his practice on civil and business disputes, and workplace and employment law in federal and state courts, including shareholders disputes under Ch. 605 and Ch. 607 of the Florida Statutes.