AB 5, PROPOSITION 22 STILL CAUSING BUSINESSES TROUBLE

Beginnings and endings in the business world are delicate things. Whether initiating a business deal and partnership or terminating an employee, business owners must take great care to secure their business and adhere to California law. A contract will inform and outline these business relationships, from beginning to end. However, just because a contract ends does not mean the terms included in it should. That is when a survival clause will be critical. What are the basics of a survival clause? As discussed above – and in a previous blog post – a survival clause defines what terms of a contract will continue to be enforced even after a contract ends. These are not blanket clauses that cover every aspect of the contract. They must be specific to particular elements and worded precisely. A contract that lacks proper survival clauses could put the survival of the entire business at risk. When does your contract need a survival clause? Business owners should consult legal guidance to craft effective survival clauses when: The business shares intellectual property, including processes, trade secrets or related information, which the blog post mentioned above discusses further The business discloses confidential information, such as financial or client details, that is protected under a confidentiality clause or agreement The parties involved must make payments or continue certain obligations included under the contract for a specific period of time For example, it is only natural for employees to have in-depth knowledge of a business’ intellectual property. If a business terminates an employee, it will be critical to ensure the former employee does not divulge that information, even long after their contract ends. Including a survival clause in the original employment agreement or even a severance agreement regarding confidentiality can secure the business’ best interests and prevent serious disputes in the future. Every beginning and end requires careful planning and preparation. It is important for business owners to work closely with an experienced business attorney to help craft and enforce contracts that will keep the business secure.

No business and no one person is the same, nor will they have the same strategies and goals. Even so, each party in a business deal should come to the table with a focus on finding an agreement that is good for both businesses and the deal itself, for negotiations to be successful. Unfortunately, this is not always the case. Some parties may have only their own benefit in mind, and in turn, may negotiate in bad faith. While it is critical to consult a legal professional before you begin negotiations for a business deal or contract, it is also essential to prepare yourself, and know what to be aware of as you move forward. 2 SIGNS THE OTHER PARTY IS DEALING IN BAD FAITH California business owners know the art of the deal. There are many issues to be cognizant of as you enter into negotiations. For example, it is always helpful to consider what you should do as you approach business negotiations – after all, that informs you of the behaviors you and the other party should avoid as well. There are two opposing behaviors in particular that could indicate the other party is not acting in good faith. Business owners should watch for: Urgency: Perhaps the other party is rushing to reach an agreement without paying attention to the details. Or maybe they push one specific agenda aggressively, without thought for any compromise. A sense of urgency for no particular reason is often a sign that the other party is dealing in bad faith. Delay: The opposite side of the coin is also a red flag. If the other party constantly avoids any type of conflict, reschedules meetings or puts off agreeing to the terms, this could also be a sign of bad faith negotiations. It is only natural to have your own business’ interests in mind. However, when it is clear that the other party does not have the deal’s interests in mind and does not consider the future remotely, this is a dangerous sign. During negotiations, if you recognize signs of bad faith, the first step will be to speak with an attorney. Seeking legal guidance can help you navigate negotiations while protecting your business.

As a business owner, you know very well how important contract negotiations are. In order to preserve the benefits of the bargain you just negotiated, its equally important to make sure the terms of the negotiation are memorialized fully and accurately in the contract, which will guide every aspect of the deal. While not every contract is the same, there are certain elements that should always be included in every agreement to protect your business. 5 CLAUSES A CONTRACT NEEDS Regardless of the specifics of this contractual relationship, these are some key clauses to include: Dispute resolution or mediation clauses: Whether minor or major, disputes are almost inevitable. Establishing guidelines for how to approach and effectively resolve those disputes will be critical to reduce risk. While mediation clauses can rarely go wrong, in certain circumstances it may be beneficial to have an arbitration clause to avoid having the dispute go through the court system. Force majeure clause: There are some things neither party can control, but which could impact the ability to fulfill the terms of the contract. This clause helps to protect your business from such matters outside of your influence, such as employee strikes and natural disasters. Confidentiality clause: Classify exactly what information must remain exclusive between the parties. This will be especially critical to protect your business’s intellectual property. However, in terms of an employment contract, business owners and employers must take care that they do not violate an employee’s civil rights with confidentiality agreements. Limitation of liability clause: If the terms of the contract are violated, you must outline exactly what liabilities each party could face in that situation. Clearly explaining the penalties for violating the contract can help often help avoid a breach of contract, since each party will wish to avoid those consequences. Termination clause: When first crafting your contract, you may not wish to think about ending that particular business endeavor or relationship. Even so, it is important to address and outline the terms and details for when and how the parties involved can legally end the contract. In each case, it will be critical to ensure the details of these clauses, and the contract as a whole, align and adhere to California laws. These five clauses are by no means the only essential ones to include when drafting your contract. In the process of creating a contract, it will be beneficial to consult a business attorney to secure the interests of your business’s future.