Business Counsel & Contracts FAQ

Though contract drafters may differ in the details of their contracts, these documents 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 a mailing address, a registered agent address or a principal 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 it 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 principal business operations, the context of the parties’ agreement and the goal(s) that each party desires to achieve in the agreement. For example, a manufacturing agreement between an automobile producer and a parts manufacturer may lay out in this section 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 manufacturer of the parts. 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, which makes up the 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 depends 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 time constraints and each party’s goals, may also influence the length and thoroughness of a contract.

Written contracts generally protect the best interests of a business. Contracts can facilitate the achievement of business goals by spelling out the perimeters of an agreement, and business costs may be reduced if a contract is breached. Lawsuits are costly and time-intensive. While a victorious party in 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 time and effort by choosing negotiation and alternative dispute resolution rather than litigation.

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 the existence of corporate indicators such as “Inc.” or “LLC” indicate seriousness and readiness to the consumer who’s comparing goods and services.

Third, corporate governance documents that are 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.

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 businesses more than doubled that of individuals self-employed at their own unincorporated businesses. Though a mere correlation, this correlation suggests that incorporated business owners are better prepared, more well equipped or better advised by an attorney.

The time required for your project will depend on its nature and complexity. Diab Law Firm, PLLC, 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.

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, PLLC, 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 two hours for a task that should reasonably have consumed one hour.

Pricing will be laid out in plain language in your paperwork when hiring Diab Law Firm, PLLC. Please contact attorney Diab for a quote on your project. You may also complete the online form to reach him. Your consultation will be free.