BUSINESS ESSENTIALS: THE CONTRACTS AUDIT
June 15, 2011
By James Forrest
At the inception of each new client relationship, I believe that it’s ideal to perform what I like to call a “contract templates audit.” The idea here is that businesses should have an internal library—a set of core templates—to deal with almost any transaction without pausing during the normal course of business. These templates should put the business in the most ideal legal position possible, considering the nuances of the particular industry and the leverage factor of the potential client. Having the ability to execute contracts in a fluid manner, without consulting your attorney is a more efficient, streamlined way of doing business.
The following list is a quick breakdown of the typical templates we put in place for each respective client:
- Customer contract
- Vendor/Procurement agreement
- Non-disclosure and confidentiality agreement
- Employment agreement
- Independent contractor/subcontractor agreement
- Reseller/Marketing/Agent Agreement
All too often, businesses earn themselves a competitive disadvantage and incur unnecessary liability by simply acquiescing to a contract presented to them by the party on the opposite end of a business transaction. As a matter of common sense, practicality, and protection, businesses should always try to enforce their own contracts when driving these types of business relationships, whether they are providing or purchasing products and services.
As we discussed in a recent piece, non-disclosure and confidentiality agreements are absolutely essential for guiding the flow of proprietary and sensitive information, from protecting intellectual property during strategic partnership/alliance discussions to muzzling former employees from disclosing trade secrets. Just as important, particularly when considering the potential actions of employees and contractors, are the agreements governing their relationships with the company both during and following their period of employment or contracting relationship. These agreements safeguard concepts like confidentiality, non-competition with the company for a period of time following termination, and non-solicitation of clients and employees as well.
Again, I believe that the corporate attorney’s role is to manage risk, control liability, and, at the same time, fuel business development for client companies by practicing in such a way that provides billing flexibility and superior advisory services. Performing a contracts audit at the beginning of each relationship ensures that our clients can take a proactive, confident stance in any transaction, knowing they are protected by the groundwork we’ve performed.