Think about the last contract you signed. Did you know which sections were negotiable? Which provisions, with negotiated changes, could have enhanced the value received from the contract?
Automatic renewal, attorney fee-shifting, exclusive jurisdiction, indemnification, insurance requirements, choice of law, limitation on liability disclaimers, integration clauses — all of these and others are legal provisions to a contract that are negotiable and may effect legal and economic outcomes to a contract.
One must always review a contract, consider the context of the contract and the relationship and leverage between the parties to decide whether the contract can be negotiated, executed or rejected. Here is one example of an often over-looked contract provision that can be negotiated.
One provision that divides attorneys is an attorney fee-shifting provision. This means that a party may need to pay for another party’s attorneys fees in certain situations. The American Rule states that each party must pays its own attorneys fees unless this arrangement is altered by agreement or statute.
Many contracts provide for attorney fee-shifting to a prevailing party. Personally, I prefer sticking with the American Rule. My reasoning is that a client can control its own attorneys fees, but has no control over another party’s attorneys fees. If the other party is a bigger entity with deep pockets the American Rule will help avoid the risk of fee-shifting in the event of a contract dispute.
Too often contracts are executed without proper review. Provisions that unduly penalize one party in favor of another come to light in a dispute when it is too late to renegotiate. Every company should have a process to review contracts prior to execution to avoid costly results. If that process does not already exist, contact your business’ attorney and set one up before you sign another contract.