Contracts and Business Counsel

Texas is home to over 2.6 million businesses and nearly 10 million private sector employees. Self-employed Texans best serve their businesses when advised by a thorough business and contracts attorney. A sophisticated business attorney can anticipate potential problems and preempt or altogether defuse them by means of the business’s formation, corporate governance documents, and contracts.

What are the Components of a Strong, Well-Written Contract?

Though contract drafters may differ in the details of their contracts, contracts generally feature three major sections:

  • Preamble – This introductory section identifies the parties. Simple though this section may be, the preamble should identify the parties by their full legal names as they appear in corporate governance, incorporation, and state documents to avoid confusion with similarly named businesses. This section should also identify each party using some other identifier, such as mailing address, registered agent address, or principle place of business. This ensures that, in the event of a contract dispute, a party cannot escape enforcement by arguing lack of reasonable business identification and is perhaps most important when a contract involves a subsidiary or affiliate of another similarly-named business.
  • Recitals – This section lays out each party’s principle business operations, the context of the parties’ agreement, and the goal(s) each party desires to achieve in the agreement. For example, a manufacturing agreement between an automobile producer and a parts manufacturer may in this section lay out that the parties are in the business of producing automobiles and automobile parts respectively and that the agreement aims to supply the auto producer with parts supplied by the parts manufacturer. This background information constitutes an important safety measure because the intent of the parties will inform the meaning of ambiguous, undefined, or poorly defined terms and provisions, especially in the event of a contract dispute. The recitals section also strongly influences the circumstances under which a party may terminate the contract for frustration of purpose.
  • Terms – This section constitutes the contract’s body and majority of most contracts. The terms of a contract typically describe the parties’ covenants, duties, conditions, warranties, representations, termination provisions, and more. The length of a contract usually turns on the complexity, thoroughness, and quantity of these terms as well as the extent to which the parties, their attorneys, and the contract contemplate and anticipate contingencies. Though they may require more hours of drafting, agreements that anticipate many contingencies and carefully spell out each party’s obligations are generally more secure. Of course, other factors, such as times constraints and each party’s goals, may also influence the length and thoroughness of a contract.

What Can a Well-Written Contract Do for Me?

A well-written contract can steer parties clear of trouble and even increase productivity under the agreement. A thorough contract can speed up execution of the parties’ goals by providing guidelines for all parties’ reference. Rather than consuming time by contacting the other party, a party in question regarding his duties under the circumstances may simply review guidelines laid out in the written agreement. This allows the parties to accomplish their goals under the contract more efficiently.

A contract also allows you to enforce your agreement in court, and the law may even require a contract. Under the Texas Statute of Frauds, some agreements must be in writing. Some of the most common such agreements include real estate sales, any agreement which cannot be completed in one year or less, agreements for payment of oil and gas commissions, and some agreements regarding the outcome of medical treatment. Such agreements not reduced to a formal writing cannot be enforced and a party may breach such an out-of-compliance agreement without fear of enforcement in court. Conversely, a written contract, whether required by the statute of frauds or otherwise, allows an innocent, non-breaching party to enforce an agreement against a breaching party with far greater ease. A written contract opens a wealth of remedies to the non-breaching party.

A contract can also obviate the need for litigation in the event of a dispute by several methods. First, a thorough contract can prevent disputes before they form by anticipating contingencies and requiring a particular course of performance thereupon. Parties are less likely to begin a dispute if they signed an agreement requiring particular behavior in their precise circumstances. Contracts can still prevent costly litigation even if the contract does not anticipate the parties’ circumstances. A contract drafted by an attorney with his client’s best interests in mind usually calls for mandatory arbitration or other alternative dispute resolution measures in the event of a dispute. Alternative dispute resolution does not mean the breaching party cannot recover damages or secure performance of the breaching party. It means only that the parties will resolve their dispute through means other than a time intensive, costly lawsuit. Even if alternative dispute resolution somehow is not an option or does not succeed, a contract can still obviate the need for a lawsuit. Because a written contract grants the non-breaching party a wealth of remedies at law, the mere threat of these remedies frequently scares the breaching party into compliance or settlement without and before litigation.

Finally, reducing your agreement to a written contract can also reduce costs. Lawsuits are costly and time-intensive. While a victorious party to a breach of contract case may recover attorney’s fees under the Texas Civil Practice and Remedies Code, recovery is rarely certain, and parties nearly always prefer to save the time and efforts required to litigate a case.

Why Should I Incorporate?

Forming a business entity gives the entity and its operators several advantages. First, business entities filed with the State protect one’s personal assets and can limit liability of lawsuits against the business to the assets of the business. Without filing with the State, your business will be a sole proprietorship, which exposes your personal assets in the event of lawsuits against the business entity. Second, a filed business entity communicates a more professional look to the public. Presence in public records and existence of corporate indicators such as “Inc.” or “LLC” indicate seriousness and readiness to the consumer comparing goods and services. Third, corporate governance documents frequently assembled alongside the entity’s corporate filings provide structure and regulate operations. The rules set forth in corporate bylaws, for example, regulate the entity’s affairs, and the benefits of such regulation are numerous. Moreover, some entity types filed with the State present tax advantages, such as pass-through taxation and lower tax rates. Finally, according to the United States Small Business Administration, the median income of individuals self-employed at their own incorporated business more than doubled that of individuals self-employed at their own unincorporated business. Though a mere correlation, this correlation suggests that incorporated business owners are better prepared, more well equipped, or better advised by an attorney.

Let Diab Law Firm, PLLC guide you through your corporate needs. Whether you want to incorporate a fledgling business, secure a transaction with a written contract, or solidify your present or future business with general business counsel, no task is too big or too small for Diab Law Firm.

FAQ’s

How much does it cost to hire an attorney to draft a contract, incorporate my business, draft governance documents, or issue other business counsel?

Pricing for these projects will be either hourly or by flat fee, depending on the project. Some projects, such as simple contracts or incorporation, may incur a flat fee, which may vary by task. Other projects, such as lengthy, complex contracts and ongoing general business counsel, may be billed hourly. Because Diab Law Firm seeks to do right by every client, the Firm will provide a detailed accounting of charges for all hourly projects and will bill only for reasonable hours and tasks. For example, the Firm will not bill 2 hours for a task that should reasonably have consumed 1 hour.

Pricing will be laid out in plain language in your paperwork when hiring Diab Law Firm. Please contact the Firm for a quote on your project. Your consultation will be free.

How long will it take to receive my document(s), to incorporate my business, etc.?

The time required for your project will depend on its nature and complexity. Diab Law Firm can prepare the first draft of a simple contract, for example, within a few days. Complex contracts will take longer. Business incorporation will take longer by nature of the State’s filing requirements and associated timelines.

References:

“Texas Small Business Profile.” U.S. Small Business Administration Office of Advocacy, 2017, https://gov.texas.gov/uploads/files/business/sba.pdf.

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