Problematic Clauses in Business Contracts

Whether you are just establishing your business or you have been operating one for years, it is inevitable that at some point, you will have to enter into a contract. Business contracts are meant to protect your rights, outline your responsibilities, and help avoid possible disputes. Unfortunately, this is not always the case and there are some things that can go wrong. Below, one of our Utah business law attorneys outlines the most problematic causes to watch for in business contracts.

Unbalanced Clauses 

Unbalanced clauses are those that heavily favor one party, which can result in a contractual relationship that is not fair. Examples of unbalanced clauses include harsh default remedies and excessive fees for minor breaches. Additionally, some contracts may give one party the right to modify the terms of the contract or terminate it altogether without consulting the other party, which can put the other side at a significant disadvantage.

Unbalanced clauses are more likely in industries that involve large investments and projects, such as construction. The stakes in these scenarios are very high and the effect of unbalanced clauses can be significant.

Clauses to Automatically Renew 

Automatically renewing a contract may seem convenient, but they can trap a business in extended agreements that no longer align with market conditions or meet the needs of the business. Automatic renewal clauses usually renew agreements for the same term as the original contract and either party may also be required to provide notice of cancellation many months in advance to avoid renewal. The impact of missing a deadline for cancellation can be quite the financial burden.

Integration Clauses 

Integration clauses assert that the agreement represents the full and final contract among all parties involved, meaning any prior agreements or understandings are excluded and do not have any legal impact. Without recognizing these previous clauses, disputes can arise over prior communications or verbal agreements before the final document was signed. It is important to ensure that any previous agreements are included in the final contract, making integration clauses irrelevant.

Unfavorable Jurisdiction Clauses

 Jurisdiction refers to the governing laws that will govern the terms of the contract and how disputes must be resolved. Unfavorable jurisdiction clauses can result in increased legal costs due to complicated litigation and result in unfair outcomes, particularly when the jurisdiction favors one party over the other. For example, when a business is based in Utah but deals with partners and suppliers in other states, it is recommended that Utah law apply to any contract.

Our Business Law Attorneys in Utah Can Ensure Your Agreement is Fair 

Being able to identify the clauses in contracts that may be problematic is more than just ensuring you have done your due diligence. It is a critical strategy to ensure that your business interests are protected. At AGS Law, our Utah business law attorneys can help you identify any problematic clauses and help you overcome any challenges that may arise. Contact us to schedule a consultation and to get the legal help you need.

Source:

le.utah.gov/xcode/Title15/C15_1800010118000101.pdf