Contracts Fall Apart, Now What?

Your gut is telling you that a business partner + the contract governing your relationship is faltering. The red flags are red flagging. Now what?

Find the contract and review it closely. I recommend starting with two critical elements:

☝🏻 First, find the contract's term or length.

This is the period when the agreement is effective. It can be specified in years, months, or even days.

The best and most well-defined "terms" clearly set the duration of the commitment.

If your business relationship is teetering, you want to figure out how far into the term you are and whether it auto-renews.

If the agreement auto-renews, is there guidance in the document on how to turn that off? This relates to the next point:

✌🏻 Second, find the contract's termination provision. This should outline how, when, and why you can end the relationship.

Commons reasons for termination include: breaching the agreement, changing business needs, dissatisfaction with the product or services, or things as unseemly as criminal behavior or financial instability.

You want to find answers to these questions:

📄 Do you have to give notice--in writing?

📄 Do you have to offer 30, 60, or 90 days to cure the problem(s)?

📄 Is there certain conduct that allows for immediate termination?

📄 Are there penalties or fees that are triggered by early termination?

Term + termination provisions define the relationship's timeline and outline how flexible (or inflexible) an exit might be.

A lot of business people review these provisions and deem them relatively straightforward and proceed accordingly.

That can be true, but it is often wise to have outside counsel review the contract and confirm that your goals and plan align with your contractual obligations.

Although I'm a litigator--and represent clients in court and arbitration to resolve business disputes--I routinely review contracts and assist clients with an exit (or break up) that allows the parties to walk away and avoid litigation all together.

Employing a litigator in this context builds protection into termination.

A litigator will draft a demand letter and

💪🏻 outline all the valid reasons for termination,

💪🏻 summarize the potential lawsuit's claims if resolution is not reached, and

💪🏻 reserve your rights and defenses if litigation ensues.

This sometimes includes attaching a draft complaint to the demand letter--to show you're serious and increase your leverage.

It also, usually, gets the other party's attorney involved. And, for better or worse, two attorneys hashing it out often gets a quicker and more certain result than business people trying to negotiate more politely.

✌🏻🔥❤️