San Diego and California Contract Lawyers
In One Word: Our California Contract Lawyers are… EFFECTIVE
Your contracts are the foundation, the concrete on which you build your business. A poor contract can save you a few dollars up front and a hundred thousand in litigation later on down the road… we see this all the time.
If you require real protection, have us create a custom-made contract that fits you like a tailored suit. Call us now, or visit our offices for a free consultation, we even validate your parking; we are conveniently located in UTC across from the La Jolla Marriott off of La Jolla Village Drive at 4225 Executive Square, 6th floor, 92037.
Call us first at (619) 793-4827 for California and San Diego contracts in the areas of:
- Start-ups & VC/Angel Funding
- Real Estate
- Business Dealing
- Noncompete and Nondisclosure Contracts
- Employment and Termination
- Hiring of Senior Personnel
- Partnership Agreements
- LLC Operating Agreements
- Purchase and Sale of a Business
- Purchase and Sale of a Real Estate
- Prenuptial and Post-Nuptial Contracts
Our law firm receives calls almost daily about contract issues. We thought we would create a page just to help you understand this complex but very interesting area of law. Contracts have regrettably taken a back seat to the Internet and many people think that one size fits all. They make the best clients because when something goes wrong, they realize that it requires immediate repair and they are not concerned with the price; they just hope they can turn the clock back on the contract.
Regrettably, that is not always the case. Just this month a client came to our law firm with a contract they modified themselves and they did not have a good contract lawyer (although he most likely told them he was). This mess could be worth a loss of over $100 million dollars in the next 10 years.
At our law firm, we love contracts. The reason we enjoy them so much is they provide an opportunity to be creative- something most areas of law do not allow. There is a big difference between a standard contract, let’s call it, and a custom contract. Although we can provide you with a standard contract, most of the work we create is based on custom work. Yes, a custom contract does cost more than a standard contract; but not in the long run. Not every contract law firm can create a custom contract as many use standard contract software. We create custom-made contracts and our clients love them!
Definition of a Custom Contract
First, let’s explain to you what a standard contract is in comparison to a custom contract. A Standard contract is just what it sounds like. It is a document we can get from software or from a book that has standard clauses. It is, in essence, a one-size-fits-all. In some cases, these are just fine. For example, in a Promissory Note, corporate bylaws, or in a simple transaction. We do agree with you that you shouldn’t waste money if there is no need to.
A custom contract, on the other hand, is much more sophisticated, and of course, takes much more time to prepare. However, at the end of the day it’s cheaper to have all the clauses you require than spend $150,000 in litigation in order to get something you forgot to deal with in your contract. (By the way, we read the average cost of litigating a case in San Diego County is $150,000). The trick to a custom contract is trying to figure out in advance what can go wrong + create a custom-made clause that will cover that contingency. Yes, it is very creative in nature and takes a lot of time and brain-power. At the end of the creation of such a contract, the writer can be very exhausted. The client, however, is very happy and that’s all that counts.
Examples of How a Contract Works
We are going to include contract samples so you understand the infrastructure and can better see what is required in your own contract. Let’s start with the basics and then we can go to some popular industries and analyze some narrower topics.
All contracts should contain certain standard clauses. We often have people come to our office for a free consultation and ask us whether we can create a one-page contract. Some ask us because they want to save money and others because they are afraid if the contract is too long that the other person will be intimidated and walk away from the deal.
Well, let’s deal with the second issue first. If you are doing business with someone who will walk away simply because you have a good contract then you most likely shouldn’t be doing business with that person. For example, let’s say you have a contract that states that if someone betrays your trade secret they have to pay $1 million dollars ( that is called a ‘ liquidated damages clause or provision ‘). If the person objects to signing doesn’t it make you wonder? Shouldn’t you wonder? If they only have to pay if they give your secret away then why won’t they sign? Too many people are afraid someone will walk away. You would be surprised. Also, don’t forget that there is plenty of room for negotiation as well. Sometimes you will build great relationships simply because you negotiated an issue; it can become a bonding event.
As to the first issue, there is no such thing as a one-page contract. It takes more than just a page to insert all of the standard clauses that a contract requires. These standard clauses may be taken for granted or make a contract longer, but they are critical in their own way.
Litigation is expensive and time-consuming; it is also slow as the courts are over-worked. Many contracts now have arbitration clauses that allow you to fight something faster and for far less money. You may not get multi-million-dollar punitive damages, but then again there is no guarantee that you will get them in court either. However, and here is the key. You have to examine the type of contract it is. Sometimes, you want to have no arbitration clause in it. For example, in a non-disclosure agreement. In that case, you want to go after major damages and have all the tools available that litigation offers. Sometimes we create a hybrid contract that allows for injunctions but otherwise, you have to arbitrate anything else.
This one states that in the event any part of the contract is void, the rest of it is not. We go on to expand that to state that in the event any sentence is void, it should be ignored or stricken so as not to affect the validity of the rest of the contract. This is a great provision for contracts that are not in California alone and cross other jurisdictions as the other side may argue for jurisdiction to be moved and what may be proper in California not be proper in another state.
We could go on and on but suffice it to state that a one-page contract is not possible if these clauses take up more than a page. By the way, no, we do not charge for them as it only takes a matter of seconds to copy and paste them.
Venue and Jurisdiction Clause
This is where you will fight it out if you are in court or arbitration. You want to make it inconvenient for the other side, so if possible you want to have the venue and jurisdiction be in your own backyard so you don’t have to hop on a plane every time their lawyer decides to file a motion or subpoena you. However, some jurisdictions are more favorable to certain issues than others, so depending on what has the most value to you in terms of what can go wrong, you may be at an advantage to choose a farther jurisdiction.
Examples of Specific Clauses for Specific Contracts (click to read more)
Patent Research ContractWe reviewed a very interesting contract in this area. Our clients were conducting research in the lab of a strategic alliance [let’s call them SA]. They were working on a specific formula. Regrettably, they had already agreed to a contract that allowed the SA to own any patentable formula they discovered or improved now or in the future, whether inside or outside their labs. This is where a custom contract that dealt with such an issue would have saved $100 million as they could have limited the interest to the one specific formula and no more.
Employment Law and Hiring and Firing ContractThis is a very difficult area of contract law and one that my clients end up in problems with quite often because they take too much for granted. If you hire someone new you should have a contract in place with that employee. You want to guard your trade secrets, for example. If you do not have it in writing, you have no protection. Now, what can happen? Let’s say that an employee who is no longer with you has to turn in their files and computer (assuming it belongs to your company), what protection do you have if that person has made back-ups? If you do not mention it, you are at risk. In another situation, a potential client who stated he did not believe in lawyers stated that his employee had left the firm with the entire mailing list of clients and went to compete head-on with him. He did not want to hire a lawyer. It happened a second time in 2 years with another employee. He decided it can’t possibly happen a third so he took a pass on a contract. You should have a provision that prevents this. Another scenario is where an employee quits with you, goes on to compete with you, and does so by hiring away all of your staff. You can protect against this with a custom contract for your particular business.
Lease ContractWe could spend many pages on leases. However, the most important clause you should be concerned about is the one that wants you to personally guarantee the lease despite the fact you have a corporation or LLC. Some go so far as to require your spouse to guarantee the lease as well. Again, this is something that you can create a custom clause for and have the other side agree to. In one such case, before we were hired, our client spent 9 1/2 months with two law firms trying to get a clause removed that forced his wife to guarantee the seven-figure lease; we got it removed in 3 days.
Another clause that is important is the one that states what will happen if the landlord sells the building. We read a very interesting and tricky lease that, when you read it carefully and tied in a number of clauses to each other, they basically stated that despite all the changes and repairs the lessee made to the property, the landlord could sell the building at any time and the new landlord did not have to honor the lease. This is where, despite the fact it is not your contract, you can have us create a clause that you can insist be inserted into the contract to counteract any such measures.
Purchase and Sale of a Business ContractThese contracts you should be very careful with. The purchase of a business is a dangerous transaction. There could be errors with the books that won’t be discovered until much later. There could be a term in which the current owner will remain and train you but won’t. The current owner may compete with you and you should set up custom provisions as to what is allowed and under what circumstances. What happens to the staff? Do they owe a duty to remain? Did they sign non-compete contracts? Who owns the client list? Will the seller keep a copy?
As you have read, this area is both fascinating and fraught with danger. One-size-fits-all is not the best money you saved but could end up being the most expensive money you didn’t ever spend. It is, however, a fun area and if you really like what you’re doing you may choose to get involved with your lawyer by explaining some of the concerns you have and realizing how they are transformed into custom clauses for you and you only. The good news is that once you have one such contract, for say non-disclosure, or hiring and firing, chances are that unless there is some major change in the law, you will be able to use it over and over again and it should pay for itself many times over. We ask you only one favor: please don’t look at a contract as a necessary evil you want to escape as quickly as possible; look at it as an investment so that it gets the respect it deserves. No go out there and make yourself a ton of money!