The Law According To Moses
Contracts: The Language of Business
By Ambrose Moses, III
Definition: A contract is a promise that the law will enforce. Contracts are the language of business. Contracts tell you who, what, where, when, how much, and “what happens if . . .”
Business owners often enter into written agreements concerning the ownership and funding of their business enterprises. Such agreements may include (but are not limited to) an agreement to form a limited liability company, a shareholder agreement, a partnership agreement, an operating agreement, a loan agreement, a promissory note, an investment agreement, or a buy-sell agreement.
Such contracts are important because they memorialize in writing the who, what, where, when, how much, how, and “what happens if . . .” concerning the ownership, finances, management, and control of the business. If it is in writing, when the need arises, everyone can refer back to what was actually agreed upon in the beginning. (It is amazing how people’s recollection of the facts changes once money comes into the picture or a dispute arises.)
Business is complex. It is not enough to do deals on a handshake and oral agreements. While an oral contract legally may be enforceable, your chances of avoiding litigation or obtaining an appropriate outcome are better when you ask the judge to interpret a written contract.
It is recommended that you work with your company’s lawyer in structuring any ownership-related contracts. You and your business partners can outline or prepare an initial draft for the lawyer to review. He will likely ask you several questions concerning the background of the deal, who is involved in the deal, and what are their expectations concerning it?
The process may take a little work as you and your business partner explore and discuss your intentions, expectations, and potential situations. But, it will be worth the effort as you build your business and business relationship upon a sound foundation of mutual understanding and communication among the owners.
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