The Importance of Business Contracts



Posted: Tuesday, April 26, 2011

by Jeremy M. Johnson
Plachta, Murphy & Associates, P.C.

Many businesses have a set of form contracts and documents that they have been using for years, if not decades. Identifying the origin of these documents can be murky. Many times, they are passed along from company to company, or with increasing frequency, simply downloaded off the Internet. “Unfortunately,” says local business attorney Ryan Huizenga of Plachta, Murphy & Associates, “while it can be tempting to save a few dollars by using form contracts and agreements in one’s business, the results can often be disastrous in the long run.”

Modern businesses utilize contracts in almost every facet of their daily activities, from agreements to purchase a new location, to the daily agreements they have with their customers to provide products or services. With the ongoing downswing in the economy, Huizenga believes that these contracts and agreements are being subjected to higher scrutiny than they ever have before. “With deals often falling apart and invoices unpaid, there is an increasing tendency to look for that ‘exit hatch’,” he believes.

Huizenga believes that the legalese on the bottom of the page is too often assumed to be a meaningless block of text which no one takes the time to read. It can be common practice to assume that documents such as a leasing agreement, real estate purchase agreement, or services contract are generally similar. “This could not be farther from the truth,” says Huizenga. “In one instance, a client came to us after being sued for engaging in an end of lease procedure they had been using for many years, and which was a fairly common practice in the industry. The party on the other end of the deal, however, claimed the lease did not allow for that procedure, and the result was costly and expensive litigation.”

To minimize the prospect of litigation and to facilitate smooth and efficient business operation, Huizenga recommends that all contracts businesses use be reviewed on a regular basis by a competent attorney. Taking this basic step, he believes, provides not only peace of mind, but a potentially significant future cost savings as well.

Ryan M. Huizenga, J.D., is a business and estate planning attorney with Plachta, Murphy & Associates, P.C., based in Grand Rapids, Michigan. He can be reached at rhuizenga@pmalawpc.comor (616) 458-3994.
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