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Sep 23 2023

Essential Legal Tips for Small Business Owners: Navigating Contracts with Confidence

Contracts are one of the foundations of business operations. Whether it is a verbal arrangement or a complex operation, contracts are essential to defend the parties’ interests and rights and to ensure the proper functioning of businesses. However, the intricacies of legal language and the complexities of legal procedures can often leave entrepreneurs, such as small businesswomen owners, feeling overwhelmed. This article explores the realities related to contracts. We will provide a panoramic view of contracts, analyze their role in small businesses, and offer guidance to Canadian small businesswomen who want to make informed decisions confidently when they negotiate and sign contracts.

Why Contracts Are Indispensable for Small Businesses?

Contracts are legal documents used to establish and formalize an agreement between two or more parties and outline the responsibilities and obligations of each party to the agreement. They provide a structured, legally binding framework that outlines the terms, rules, expectations, and obligations under which all parties involved can build business relationships.

Types of Contracts 

Some common contracts used in small businesses include the following:

Shareholders’ agreements: In these contracts, the shareholders of a company define their rights, responsibilities and obligations with respect to the management, ownership and decision-making of the company. They generally cover share transfers, dispute resolution mechanisms, voting rights, management functions and purchase agreements, among other issues.

Lease agreements: These agreements are legally binding contracts that describe the terms and conditions under which a landlord agrees to lease the property to a tenant. They set out the amount of the rent, the term of the lease, the responsibilities of both parties (e. g. maintenance, repair, delivery) and other related conditions.

Commercial contracts: Commercial agreements include many types of contracts and agreements made by companies for purposes such as partnerships, joint ventures, distribution agreements and sales agreements.

Supplier Agreements: These are contracts between a company and its suppliers, which describe the conditions under which the supplier will supply goods or services to the enterprise.

Navigating the Complexities of Contracts 

The language, legal nuances, and procedures related to contracts can easily intimidate people, for instance, many women entrepreneurs perform greatly in their businesses but know little about laws. If small businesswomen want to navigate the mentioned complexities of contracts, they must become knowledgeable in the strategies that can level the playing field. Let´s expose some tips that will help Canadian small businesswomen to confidently navigate contracts:

1.      Read and Ensure You Understand the Key Contract Terms

A good starting point to understanding a particular contract is to read the key terms and understand your rights and obligations. The key terms can vary depending on the type of agreement, but typically include:

  • Parties – the parties entering into the contract.
  • Offer and Acceptance – contracts are seen as a promise, and the existence of a bargain is one of the main criteria for the enforceability of a promise; that is, the mutual understanding of the parties to the contract to sufficiently certain terms (sometimes called an offer and acceptance).
  • Consideration – represents an exchange of value between the parties, often in the form of money, goods or services.
  • Terms and Conditions – the specific rights, responsibilities, and obligations of each party. This may cover areas such as payment terms, delivery dates, scope of work, or performance expectations.
  • Term and Termination – the contract’s start and end dates.
  • Dispute Resolution – the process for resolving disputes, which may include arbitration, litigation, or mediation.

If you are having trouble understanding the legal jargon, there are online resources provided by the Canadian Bar Association, which include plain-language explanations of common legal terms intended to enable people such as businesswomen to grasp the essence of a contract’s content.

2. Implied vs. Express Terms     

In legal cases, courts have the authority to use the actions of individuals involved to decipher their true intentions within a contract. Occasionally, if it’s necessary to ensure the contract functions effectively or aligns with the parties’ intentions, the court may introduce a term to the contract. This typically occurs in situations where there is ambiguity or a vital aspect missing from the contract. While the court primarily examines the language employed by the parties, it also takes the context into account to ascertain their true intent. In business transactions, courts may introduce terms to enhance the contract’s functionality if it’s evident that both parties would have reasonably included such a term, or if it’s essential to render the contract coherent. However, more commonly, courts will interpret the contract’s terms precisely as they are written.

3.      Learn How to Use Your Negotiating Powers

When faced with a contract, it’s crucial not to rush into signing it without negotiation. Many women, especially those new to such dealings, mistakenly think they lack the skills needed for negotiation. However, even if you have legal counsel to guide you through the negotiation process, it’s essential for Canadian small businesswomen to develop their negotiation abilities. This empowers them to shape contract terms that align with their business goals and safeguard their interests. Thankfully, various customized for women entrepreneurs, such as the University of Toronto’s Initiative for Women in Business and Young Women in Business, offer negotiation courses and programs to help you master the art of effective negotiation.

4.      Avoid Contractual Pitfalls

Poorly written contracts can pose significant challenges, including unclear language, terms that can’t be enforced, or insufficient methods for resolving disputes. Canadian small businesswomen should prioritize developing their skills in assessing and managing contracts while also familiarizing themselves with common contract-related issues. Fortunately, programs like the Business Center for Women in British Columbia offer valuable resources and training to help navigate these complexities. And if still in doubt, seek legal advice.

5. Welcome Technology in Your Day-to-Day Contract Management

Advancements in technology have significantly improved contract management ease and accessibility. There are now various software tools available that streamline different aspects of the contract process, making it easier to draft, sign, and manage contracts. Well-known options like Law Depot and Legal Templates.net offer customizable templates tailored to specific tasks and current user needs.

6. Seek Legal Advice

Seeking legal advice is just as crucial as comprehending contracts. A skilled business lawyer can offer valuable insights into the legal consequences of various contract clauses. They can provide you with knowledge that might take you significantly longer to acquire independently. Additionally, they have the expertise to readily spot potential pitfalls and enhance contracts to protect the business owner’s interests effectively. Their insights are drawn from practical experience, which can’t be substituted by consulting educational resources. Programs like the Investment Readiness Program (IRP) offered by the Women’s Enterprise Organizations of Canada provide financial support to women entrepreneurs in need of legal counsel.

Conclusion

Contracts are essentially tools that establish the fundamental terms for the relationships crucial to the functioning of small businesses. For Canadian small businesswomen, mastering the skills needed to effectively handle contracts can be pivotal for business growth and success. In this regard, there are several valuable tips to consider, including understanding key terms, seeking legal guidance, honing negotiation skills, gaining insight into common pitfalls, and utilizing technology. Regrettably, gender disparities persist in Canada, making strategic knowledge particularly beneficial for women entrepreneurs navigating these challenges daily.

About the author:

Roberts & Obradovic Law Firm is a women-owned law firm dedicated to delivering swift, expert legal counsel and representation across a diverse spectrum of corporate, privacy, employment, and litigation issues. Their team of small business lawyers is committed to assisting both businesses and individuals in navigating the complexities of the legal landscape with precision and excellence.

https://robertsobradovic.com/

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Written by Dwania Peele · Categorized: Featured Member, Roberts & Obradovic Law Firm · Tagged: business law, contract clarity, contracts, law

Aug 16 2017

Most business partnerships end in divorce. Here are the top 5 ways to beat the odds.

Done correctly, going into business with a partner can be a great way to grow quickly as each partner brings expertise or assets that the other party is missing but which are crucial for business success. Yet, according to some studies, 80% of business partnerships fail. When you consider that the failure of a business partnership can often lead to loss of valued relationships, financial struggles, lawsuits and even complete business failure, those are eye-wateringly bad odds.

So, how do you beat the odds?

 

Get on the same page

If you’re starting a business together, don’t jump straight into setting up the bank account and buying inventory. Spend a lot of time (I’m speaking about days if not weeks) mapping out what your business will look like. What are the business goals? Timelines? What is your vision for the business and what it will take to achieve this? What is the sacrifice plan? When will you increase your team and how? What is the exit plan?

Skipping this step can be disastrous. If you plan to build a large business with 10 locations across Canada and sell it to your largest competitor in 7 years for $10 million and your partner is content to stay small as long as she can make $72,000 a year from it, your business partnership is not going to work out and it’s best to know this before you invest your energy and money.

 

The Devil (and the Lawsuit) is in the details

The big picture is crucial but it will remain an unfulfilled mission statement on a wall somewhere if you don’t nail down the details.  Having a clear, detailed plan can often be the only thing that allows you to ride out changes in the market and in the emotional state of the partners. Before you get started:

  • Establish the objectives and expectations of each partner;
  • Determine each partner’s contribution in terms of funds, skill and time;
  • Complete an organizational chart, even if right now it will only contain two names- yours and your partner’s, and assign the jobs each partner will have. This is often the most difficult part as someone has to be the Managing Partner.
  • Form evaluation objectives and plan ways to monitor and assess performance;
  • Decide on a procedure to resolve problems when there is a serious issue e.g mediation or arbitration.

 

Map out Your Mutual Expectations in Writing

Now that you know where you want to go in your business and how you plan to get there, step back and think about the roadmap for the relationship between you and your partner. Before you visit a lawyer (more on that later), you and your partner(s) should take the time to draft your version of a partnership agreement. This will save on legal fees as it will allow you to experiment with different structures and solutions on your own, get a clearer idea of what you need to address and distinguish business issues from legal issues. The more work you have done before stepping into your lawyer’s office, the more useful and less expensive your agreement will be.

 

Get Professional Advice Early On

I know you wouldn’t start a partnership without legal advice! A business lawyer who has helped form partnerships before can help you assess your draft agreement and determine how realistic and beneficial your wish list is. She can also help develop your negotiation strategy including determining what you should ask for and when.

You should also have a consultation with an accountant who will be able to give you advice on how to make a budget, manage revenue and minimize tax liability.

 

Trust Your Instincts

A wise person once said- “Always trust your gut. It knows what your head hasn’t yet figured out.”  Sometimes, a partnership looks great on paper but something just doesn’t add up.

A former client had the opportunity to join a business started by a husband and wife team which had strong financials and an expanding client base but in her meetings with the husband, she just always felt uneasy. Still, she thought she was being unduly sensitive and decided to go ahead with the partnership on the expectation that she could do really well financially. It turned out to be a disaster. The husband was a manipulative creep who consistently undermined my former client and then tried to force her out of the business without compensation. During that period, every time I spoke with her she expressed how upset she was, not so much with the partner, but with herself for ignoring her gut.

So, by now you’re probably thinking that you need to have a long chat with your partner but you’re wondering how to raise the subject without causing a rift. I’ll discuss that next month.

 

 

Andrea Henry

Vox Law LLP

The Law Firm Built With Love for Small Business™

T: 416.639.6235

E: andrea@voxlaw.ca

W: http://www.voxlaw.ca

Sign up to receive legal tips I don’t share anywhere else and a must-have checklist for Canadian small businesses at  The Secure Startup.

This article is made available by Andrea Henry of Vox Law LLP for educational purposes only and not to provide specific legal advice. By reading this article you acknowledge that there is no solicitor-client relationship between you and Andrea Henry and/or Vox Law LLP. The article should not be used as a substitute for competent legal advice from a licensed lawyer.

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Written by Dwania Peele · Categorized: Andrea Henry · Tagged: Andrea Henry, business, business success, contracts, divorce, lawsuit, partnerships

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