Dec Seminar Session 3 Contracts


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Dec Seminar Session 3 Contracts

  1. 1. Drafting Contracts & Agreements What You Should Know…Important Agreements & Provisions
  2. 2. Primary Legal Objectives When Representing Entrepreneurs <ul><li>Protect business assets </li></ul><ul><li>Protect business owner from personal liability </li></ul>
  3. 3. Get Your Contracts in Writing! <ul><li>With written contracts, no “he said, she said ” </li></ul><ul><li>Get something in writing! </li></ul><ul><li>Ohio courts have recently held that Email communications can constitute contracts. </li></ul><ul><li>Clearly define all terms </li></ul>
  4. 4. Get Contracts in Writing, cont. <ul><ul><li>State performance to be provided by parties </li></ul></ul><ul><ul><li>Payment amount and timing of payment </li></ul></ul><ul><ul><li>Disclaimers and limitation of liability </li></ul></ul><ul><ul><li>Termination and Default </li></ul></ul><ul><ul><li>Indemnification </li></ul></ul><ul><ul><li>Confidentiality provision </li></ul></ul><ul><ul><li>Choice of law provision </li></ul></ul><ul><ul><li>Warranties </li></ul></ul>
  5. 5. Commercial Contracts: Business to Business <ul><li>Additional provisions to Include: </li></ul><ul><ul><li>Attorney Fees </li></ul></ul><ul><ul><li>Costs of Collection </li></ul></ul><ul><ul><li>Liquidated Damages </li></ul></ul>
  6. 6. Get Contracts in Writing, cont. <ul><li>Contracts should be dated </li></ul><ul><li>AND </li></ul><ul><li>Signed by all Parties involved in transaction </li></ul>
  7. 7. How to Execute Contracts <ul><li>Execute contracts in the name of your business entity to protect you from personal liability. </li></ul><ul><li>Example: </li></ul><ul><li> Worley Law, LLC </li></ul><ul><li>By:_______________ </li></ul><ul><li>Caroline Worley </li></ul><ul><li>Its: Sole Member/Member </li></ul>
  8. 8. Collecting on Your Invoices <ul><li>4 steps to collect payments </li></ul><ul><li>Attempt to collect on your own </li></ul><ul><ul><li>Send a short letter from an attorney </li></ul></ul><ul><ul><li>File lawsuit </li></ul></ul><ul><ul><li>Negotiate with customer for some payment </li></ul></ul><ul><ul><li>Example </li></ul></ul>
  9. 9. Specific Agreements: LLC Multi-Member Operating Agreement & Corporate Bylaws <ul><li>Multi-Member Operating Agreement & Corporate Bylaws </li></ul><ul><li>* How will the Company be managed? </li></ul><ul><li>* Will the Majority rule? What happens if deadlock? </li></ul><ul><li>* Who will manage the company? </li></ul><ul><li>* Capitalization and funding of company and issuance of </li></ul><ul><li>ownership certificates </li></ul><ul><li>* How are profits and losses to be allocated among owners – in </li></ul><ul><li> proportion to capital contribution or membership interest? </li></ul><ul><li>Take time at beginning or inception of business to determine these issues to avoid costly litigation later! </li></ul>
  10. 10. Buy-Sell Agreements <ul><li>Purpose: In the event that an owner of a company wishes to voluntarily dissociate from the company or in the events of death, disability, bankruptcy, or other defined events, a Buy-Sell Agreement dictates how that person’s ownership is valued. </li></ul>
  11. 11. Buy-Sell Agreements, cont. <ul><li>Buy-Sell determines the amount a business owner is to be compensated for ownership in the business </li></ul><ul><li>Agreement sets forth how value to be determined – i.e., average of 3 appraisers OR value can set at time business created </li></ul><ul><li>Right of first refusal if third party offer to purchase </li></ul><ul><li>* To Company or its Members proportionately </li></ul><ul><li>* To Heirs – management issue arises – assignee </li></ul><ul><li>* Husband-Wife owned companies –reversion </li></ul><ul><li>Examples </li></ul>
  12. 12. Work for Hire <ul><li>If hired to complete work for another, make sure it is clear in your Agreement who owns the work product and how it can be used after created. </li></ul><ul><li>Define ownership in the event of non-payment </li></ul><ul><li>Example – Software code creation </li></ul>
  13. 13. Does the Home Solicitation Sales Act Apply to Your Business? <ul><li>Definitions & Who the Act Applies to: </li></ul><ul><ul><li>“Home Solicitation Sale” is a sale of consumer goods or services in which the seller engages in a personal solicitation at a buyer’s residence, including solicitations in response to an invitation by the buyer. </li></ul></ul><ul><ul><li>“Consumer Goods or Services” goods or services purchased primarily for personal, family, or household purposes. </li></ul></ul>
  14. 14. Does the Home Solicitation Sales Act Apply to Your Business? <ul><li>This Act does not apply to: </li></ul><ul><ul><li>Contracts for less than $25 </li></ul></ul><ul><ul><li>Transactions conducted entirely by mail or telephone if initiated by the buyer </li></ul></ul><ul><ul><li>The buyer initiates the contact and the seller has a business establishment at a fixed location where the goods or services are regularly offered or exhibited for sale. </li></ul></ul><ul><ul><li>The buyer initiates the contact by specifically requesting seller to visit buyer’s home for the purpose of repairing or performing maintenance on personal property. </li></ul></ul><ul><ul><li>Sales of real property with a licensed broker </li></ul></ul>
  15. 15. If the Home Solicitation Sales Act Applies to Your Business <ul><li>Must comply with Act if your business falls within the confines of the law – 3 day right of rescission </li></ul><ul><li>See the Ohio Attorney General Website </li></ul><ul><ul><li> </li></ul></ul><ul><ul><li>Handouts </li></ul></ul><ul><ul><li>Example Inbar Designs </li></ul></ul><ul><ul><li>Penalties for non-compliance </li></ul></ul>
  16. 16. Protecting your Trade Secrets: The Value of your Company <ul><li>Definition: A trade secret is information that derives independent economic value from not being generally known or readily ascertainable by proper means to others and are the subject of efforts that are reasonable under the circumstances to maintain its secrecy. </li></ul><ul><li>i.e., client lists, business processes, marketing strategies, etc. </li></ul><ul><li>If protected, cannot be used by others in competition </li></ul><ul><li>Example </li></ul>
  17. 17. Ways to Protect Trade Secrets <ul><li>Confidentiality Agreement </li></ul><ul><li>Non-Solicitation Agreement </li></ul><ul><li>Non-Competition Agreement </li></ul><ul><li>Work Place Policies & Employee Handbook </li></ul><ul><li>Passwords and locks/access </li></ul>
  18. 18. Commercial Leases <ul><li>Tenant Market – Deals Plentiful due to high vacancy </li></ul><ul><li>A badly negotiated lease can cripple a business </li></ul><ul><li>Key issues to address: </li></ul><ul><ul><li>Tenant Improvements </li></ul></ul><ul><ul><li>Default and Termination provisions </li></ul></ul><ul><ul><li>Negotiate low option rates long term </li></ul></ul><ul><ul><li>No personal guarantee </li></ul></ul><ul><ul><li>Landlord Maintenance of HVAC and other systems </li></ul></ul><ul><ul><li>Caps on CAM – avoid hidden “additional rent” </li></ul></ul><ul><li>Example </li></ul>
  19. 19. Purchasing Real Estate <ul><li>Buyer’s Market </li></ul><ul><li>Key issues to address: </li></ul><ul><ul><li>Due diligence – timing and deposits – make refundable </li></ul></ul><ul><ul><li>Allow for Extensions </li></ul></ul><ul><ul><li>Default and Termination provisions </li></ul></ul><ul><ul><li>Title Search for Defects </li></ul></ul><ul><ul><li>Appraisal should at least equal purchase price </li></ul></ul><ul><ul><li>Put contract in name of Company </li></ul></ul><ul><ul><li>Allow for Attorney Review </li></ul></ul><ul><ul><li>Inspections & Financing Contingency </li></ul></ul>
  20. 20. <ul><li>The Most Important “Legal” Issues a Small Business in Ohio Must Address </li></ul>
  21. 21. Contact Info <ul><li>Caroline Z. Worley, Esq. </li></ul><ul><li>Worley Law, LLC </li></ul><ul><li>28 Westerview Drive </li></ul><ul><li>Westerville, Ohio 43081 </li></ul><ul><li>614.670.9458 </li></ul><ul><li>[email_address] </li></ul><ul><li> </li></ul><ul><li> </li></ul>
  22. 22. Questions?