How To Protect Your Business Against Litigations

Recognized legally, the contract makes it possible to prevent disputes and conflicts that arise in professional relationships. Binding the parties towards each other, it has the value of an obligation: no one can derogate from the terms of the contract to which he is committed. To effectively protect your company, this article has been written by the lawyers working under the Law Offices of Nicholas D. Heimlich so it is better to be attentive to the clauses and terms that will frame the agreement: effective prevention first requires good drafting! Do not hesitate to seek advice from a lawyer.

To Properly Prepare The Drafting Of The Contract

Before embarking on the drafting of a contract, it is essential to prepare the agreement, which will serve as the basis for a good relationship. In the negotiations preceding the drafting, it is important to ask the right questions: Who is his contracting partner? How to ensure a maximum of guarantees? Find the points to know in priority.

Find Out About The Creditworthiness Of The Contracting Partner

Is your partner solvent? Solvency is the ability of a natural or legal person to repay debts: insolvent, your customer, or your supplier will not be able to meet its commitments. It is, therefore, essential to check the financial health of the co-contracting company.

During meetings and discussions, take care to know your contracting partner and his business well: how long has the business been in business? Where is it in its evolution, does it have plans for the future? Has it experienced ups and downs? Where is it on the market? What about his financial health? Are there any borrowings pending? From an informal point of view, you can also rely on your own experience with the co-contractor.

To better interpret the data, it is often possible – and advised! – to consult an analyst who will establish a solvency investigation as well as recommendations.

Think Of Collateral As Collateral

Payment can be guaranteed by different types of collateral. Mortgage of a property, lien on an element of the heritage engaged with several creditors, pledge or pledge … in the event of default or impossibility of payment, on the part of the debtor, the creditor can seize property furniture or not, or personal security committed as a guarantee in the contract.

These possibilities must be assessed when negotiating with the other party so that they can then be included in the contract.

Guarantee Clauses Against Unpaid Bills

Besides collateral, it is also possible to protect against unpaid bills by certain specific clauses.

For a seller to a buyer, the retention of title clause allows the seller to remain the full owner of the property until the buyer has fully paid for it. It is a way of ensuring that all of the merchandise is properly settled. The property will only become that of the buyer when the full price has been paid.

To know the clauses applicable to your agreement and which will protect you the best, do not hesitate to have a contract law professional accompany you.

The Clauses Which Anticipate The Litigation

Apart from the prevention of unpaid debts, certain clauses make it possible to anticipate litigation in a more general way, by focusing on the litigation as such:

  • The jurisdiction clause specifies the jurisdiction which will be competent in the event of a dispute. It makes it possible to prevent decisions by the judge by limiting the scope of his reviews.
  • The resolutely clause specifies that in the event of failure to fulfill the obligation by one of the parties, the contract is canceled without the intervention of a judge. This clause is not valid for all contracts.

Poorly drafted, these clauses as a whole have little effectiveness: to ensure good anticipation of disputes, a legal professional will be able to find the most suitable clause for each contract.

The Commitment Of Contractual Liability

In the event of non-performance or poor performance of the entire contract, the responsibility of the party who has failed to fulfill his obligations is engaged, and the latter is liable to a sentence for payment of damages. Without a penalty clause, the amount is assessed by the judge. The payment of damages is not the only penalty, and the debtor can also be forced to perform – “forced execution” – to compensate for the damage.

Under certain conditions, it is possible to specify non-liability or liability limitation clauses for the debtor, when drafting the contract.

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