This is the next post in a series of articles discussing contract negotiation, drafting, and review in Olympia or Tacoma, Washington. The previous article addressed the importance of written contracts in business dealings. Memorializing an agreement in writing should not be considered an unnecessary formality. It protects the parties in a variety of ways. A written contract will avoid disagreements by identifying rights and responsibilities and including rights that a person might assume they have, but which they don’t actually have unless they get a promise in writing. This means that, should a dispute arise, the battleground will be more clear and the lawsuit should cost less as a result. A knowledgeable attorney can prepare a written contract and help address business risks on your behalf. In the article we will common contractual provisions used to distribute risks between the contracting parties. If you need assistance, contact our office today to speak to a lawyer.
As discussed in our previous post, written contracts provide a safety net for the transacting parties. Not only will the agreement clearly set forth the rights and obligations of the parties, but it should also identify and address how to handle any risk areas in the deal or project. An attorney tasked with drafting and negotiating a written agreement can recommend contractual provisions to distribute potential liabilities fairly amongst the parties. Commonly used clauses include insurance obligations, indemnification, dispute resolution, confidentiality requirements, limitation of liability and warranty obligations. In many cases, unless the parties expressly agree in writing to restrictions or requirements on these subjects, the protections are not available.
Consider the following examples. Company A is developing a new product line and contracts with Company B to perform research and development regarding the new products. To accomplish the business objectives, Company A must disclose proprietary information to Company B about the engineering and design of their existing products. This information is very valuable to Company A. As part of the services contract, Company A should insist that Company B be restricted from disclosing its proprietary information to any third parties. A failure to do so could result in the loss of trade secret protections otherwise available by law and significant financial damages to Company A.
Company C is hiring an executive to act as the chief of sales and marketing. In his executive role, the individual will be given access to Company C’s list of current and prospective customers. Company C closely guards its customer information to retain a competitive advantage in the industry. The company may wish to restrict the executive’s ability to use the customer information in the future if the executive no longer works for Company C. A well-drafted employment contract would likely include a non-competition provision. This type of clause would preclude the executive from engaging in business similar to Company C’s business for a period of time and within a specific territory following his termination. To ensure that the restriction is enforceable, Company C should engage an attorney who is aware of the state law requirements about restrictive covenants.
In light of the potential consequences of omitting or incorrectly drafting key contractual language, we cannot overstate the importance of retaining knowledgeable legal counsel to prepare your contracts. If you need assistance, contact our office today to speak with an Olympia contract lawyer. The firm also services the Thurston County cities of Lacey, Tumwater, and Yelm, the Pierce County cities of Tacoma, Puyallup, and Lakewood, the Lewis County cities of Centralia, and Chehalis, the King County cities of Seattle, Auburn, Bellevue, Burien, and Federal Way, as well as other areas in Washington, including Grays Harbor, Mason, Cowlitz, and Pacific Counties.