10 Things All Business Owners Should Have in Their Contracts

A well-drafted contract can help you navigate your company and protect it against perhaps otherwise unforeseen liabilities.  Here are 10 provisions you should consider including in all of your business contracts:

1.         Merger Clause.

Merger clauses demonstrate that the contractual agreement you made with another party is “integrated,” meaning that all conditions, promises, and representations are contained within the writing itself.  They can be helpful in preventing litigation by a party who produces outside evidence that contradicts the express promises you made in your written contract document.     

2.         Forum (Choice of Law) Clause.

So-called “forum selection” clauses allow you to choose the jurisdiction and even the law applied for any potential litigation that arises.  For instance, as a California business, you may opt to apply California law in a nearby superior court.  Subject to a reasonableness standard, these clauses can help your business avoid huge litigation costs in faraway jurisdictions.

3.         Alternative Dispute Resolution.

There are different types of alternative dispute resolution, which means a way to resolve the your issues with the other party without engaging in the court system. Mediation, where you work with a neutral third party, generally a retired judge or an experienced attorney, to reach a mutually agreeable decision.  Sometimes no decision is reached because the parties cannot agree.

Arbitration clauses stipulate that your and the other party mutually agree to resolve any disputes through an arbitrator (generally a retired judge, sometimes a panel of retired judges) rather than through normal litigation channels.  After an arbitrator hears both sides, then a decision will be made that can be binding or non-binding, depending on what the parties agreement says. 

4.         Attorneys’ Fees Clause.

Attorneys’ fees clauses allow your company and the other party to decide ahead of time who pays for the attorneys in any litigation that may occur.  For instance, you may agree to a clause that requires the losing party to pay for all attorneys’ fees.  Such a clause could help your company in doing business with another party that is notoriously litigious.  In California, attorneys' fees can only be acquired by contract or statute.  If the claim that you're pursuing in court does not allow you to recover your attorneys' fees on a statutory basis; for example, the other party didn't pay the bill, then you'll have to make a tough decision on whether your attorneys' fees will be too high to make pursuit worthwhile. 

5.         Severability Clause.

Severability clauses essentially allow you to preserve an agreement in the event that a court rules that a part of the contract is unenforceable.  Even if an important provision of your company’s agreement with a vendor is no longer valid, the severability clause states that the rest of your contract is still fully enforceable.   

6.         Non-Waiver Clause.

Non-waiver clauses typically state that your company will not waive its rights or remedies to a contract term even if it is not zealously enforced.  Naturally, such a clause provides your company with greater autonomy and flexibility in contract management, depending on your current circumstances and exigencies.  

7.         Liquidated Damages Clause.

Liquidated damages clauses predetermine the amount of damages to be paid in the event of a contract breach.  Such a provision benefits your company by creating certainty in the potential liabilities of the transaction.  To be enforceable, the clause must specify an amount in damages that was reasonable at the time of your agreement’s execution.        

8.         Indemnification Provision.

Indemnification provisions, when explicitly stated, allow your company to immunize itself from liability for ordinary negligence.  Despite some statutory exceptions, these provisions present a common way for your company to prevent unforeseen costs from litigation.

9.         Headings Clause.

Headings clauses touch upon an aspect of contract formation that is easily overlooked by non-attorneys.  It states that the headings used to label provisions in the actual contract document have no significance for the purpose of contract interpretation.  Almost needless to say, this helps protect your company against undue uncertainty in litigation.

10.       Confidentiality Clause.

Confidential clauses prevent your employees or other parties from disclosing your company’s confidential information, such as trade secrets.  Such provisions are very important in protecting your company’s intellectual property against leaks, whether or not intentional.

If you have any questions or would to speak to a business attorney, contact Elena Rivkin Franz at elena@franzlawfirm.com or (408) 940-5360.      

How Do You Partition Real Property in California?

If you are interested in learning more about how to partition real property, to begin, it is important to understand what a “partition” is.  Under California law, you may divide or “partition” real property you own with another person into individual shares.  Instead of altering title, it allows you to establish exclusive possession of the property you already own.  Successful partitions permanently resolve all ownership disputes, leaving you to use and enjoy your property freely.  

Since a house doesn't divide into individual shares easily, houses are generally not subject to "partition" by division into shares, and instead, you may force or be forced into a sale to the other property owner or a third party. 

In general, there are two types of partition in California: “voluntary” and “judicial.”  Voluntary partitions are created by agreement.  Hence, you and the other co-owners are free to choose how to partition the property, but everyone must agree.  In fact, a contract or deed effecting partition is void if it is not executed by or binding on all co-owners.   As in most situation, coming to an agreement with the parties involved is the best option if you can agree without resorting to the expense and stress of a judicial partition.  

Judicial partitions, as the term suggests, results from litigation where you have to go to court in order to have a judge or jury make a decision for you.  You may bring an action to have a judge ascertain and partition your portion of the property.  All parties with interests in the property must be named in the complaint.  One benefit of this option is that the court must resolve any other underlying issues related to the property, including title disputes and the status and priority of liens.

Going to court to resolve a real estate dispute may be a very stressful event; however, balancing this against the stress of making payments or continuing involvement with someone you no longer with to see must be weighed against it.  It's never an easy decision.

If you any questions about partitions of real property in California, you’re welcome to contact real estate attorney Elena Rivkin Franz at (408) 940-5360 or elena@franzlawfirm.com.


Mentioned in the Silicon Valley Business Journal

Take a look at the following notice posted in the Business Journal listing attorney Elena Rivkin Franz as a "person on the move".  


The listing highlights Franz Law as a law firm providing general strategies for litigants involved in real estate, commercial or general litigation disputes.

If you have an inquiry in one of these areas, contact attorney Elena Rivkin Franz at (408) 940-5360.

My Neighbor Has Been Using Part of My Property

What do you do if your neighbor has been using part of your property without permission, or your knowledge, for years?

First, you should review your deed to see if your neighbor’s property has a legally recorded right to use your property. Many times, an easement might be recorded and part of the deed to your property for a variety of reasons:  to allow neighbors to use part of your driveway to access their property, allow the public access to cross through, or with even greater frequency, to allow utilities companies like PG&E access rights related to maintaining and servicing the utilities.

If your neighbor has been using your property and there is no recorded easement, it may be a prescriptive easement. This means that your neighbor’s use of your property is without your permission.  In order to have a prescriptive easement, it must be shown that: (1) the land was used continually for five years; (2) the land was possessed in a manner that was open, notoriously and clearly visible; (3) the land use was hostile and adverse to the true owner; (4) it was used under a claim of right.  

If the land has been used in a way to satisfy this criteria, this will allow the encroacher continued use of the land.  The rightful owner of the land will still have a continued right to use the land.  If you are the rightful owner of the land, you do not have a right to suddenly close of the encroachers use of your right.  

A prescriptive easement is not automatically created and requires judicial determination through litigation.  The law related to easements is also very fact specific and needs legal analysis related to your particular situation.  If you have a concern related to such matters, you're welcome to contact real estate attorney Elena Rivkin Franz at (408) 940-5360 or elena@franzlawfirm.com

Mortgage Debt Forgiveness Debt Relief Act Extended

The Mortgage Debt Forgiveness Debt Relief Act was set to expire on December 31, 2012.  Through eleventh hour negotiations in Congress, the Act was extended for yet another year.  

Homeowners who may rid themselves of properties through short sales and foreclosures in 2013 will once again be able to benefit from this Act.  The extension means that homeowners may be exempt from paying taxes on the "phantom income" they receive when a debt is discharged.  Without the extension, many homeowners would be subject to enormous taxable income amounts because of big value drops in their properties.

If you are considering a short sale or a foreclosure, make sure to take to an informed advisor regarding the consequences before they occur.  If you need to speak with a real estate attorney, you are welcome to contact attorney Elena Rivkin Franz at (408) 940-5360 or elena@franzlawfirm.com.  

Preparing for Real Estate Mediation

If you are involved in a dispute about a real estate matter, oftentimes, your contract states you must mediate your dispute before you turn to the court or seek to arbitrate the matter.  

Mediation is a form of alternative dispute resolution (ADR).  Mediation allows the parties to reach a settlement with the help of a neutral third party, generally a retired judge or experienced attorney.  It is a preferred choice by many because it can reduce costs and quickly resolve conflicts.

Please allow the following to be a guideline on what you can do to better prepare for the mediation of your case:

1.  Prepare Your Case

Preparing your case includes deciding what you need and hope to achieve.  This includes your claims for damages.  Make sure you prepare a detailed summary of your damages, including estimates, invoices and receipts.  If you have additional evidence of your losses, make sure to bring them and be prepared to share them.

2.  Evaluate Available Alternative If Mediation Is Unsuccessful.

Mediation is often successful because the alternative is initiating or continuing with litigation.  Litigation can be costly to finance when you add attorney’s fees, costs for depositions, discovery and experts.  Even if you are ultimately successful in the end, you may still need to finance your case to reach a final resolution.

3. Exchange Info With The Other Parties Before Mediation

Before mediation, the attorneys who represent the parties will exchange mediation briefs that describe the facts, background, and legal authority that supports their position, in addition to their claim for damages.  It is also helpful to have a draft settlement agreement available for the mediator to review before the mediation.  If you reach a settlement, this will allow you to expeditiously memorialize your agreement and finalize the draft settlement agreement.

4.  Have All Parties Available That Need To Provide Input Into A Settlement.

Don’t delay reaching a settlement because you do not have authority to settle from a spouse, real estate broker, manager or insurance adjuster.  Make sure everyone you need is available so you can make the most of your time with the mediator and other parties.

If you need assistance enforcing or requesting a mediation clause, or need general assistance with your real estate case, you're welcome to contact attorney Elena Rivkin Franz at elena@franzlawfirm.com or (408) 940-5360.