What Do Lawyers Look For When Evaluating Contracts?

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Corporate attorneys are frequently asked to assess various contracts that their clients bring to them. Generally, clients only want to know whether it is a “good” contract, or if it “covers everything.” But, this is only a small fraction of what an attorney should analyze. So, what do lawyers look for when evaluating contracts?

Essential terms

The first thing to check is whether all of the essential terms of the contract are included. Although it is technically possible to form a contract orally in most jurisdictions, or even through very poorly written agreements, a good contract will specifically identify all of its essential terms. When those terms are not expressly spelled out, the law will often supply them for the parties, or may find them to be so critical that their absence completely invalidates the agreement.

For example, in some types of service agreements, a definite term over which the agreement will take place must be included or it may be unenforceable. Another, surprisingly common example is failing to identify a valid exchange of consideration. What is being exchanged for what in a contract is known as “consideration”. Without a valid exchange of consideration, a contract is not formed. So, if someone is to perform a service, but there is no corresponding obligation to pay that person, or the pay is so small as to be completely unfair, there is a lack of consideration and no valid contract.

No conflict with the law

Another common problem with contract formation is an inadvertent conflict with existing law. This is frequently the case in contracts relating to highly regulated industries, such as in bulk cable agreements, securities agreements, lease agreements, and others. There are frequently requirements set forth in statutory or regulatory law which either must be included in the contract in order to be valid per the laws of that jurisdiction, or prohibited clauses which cannot be included in contracts without invalidating them.

For example, many states have specific provisions that must be included in lease agreements, such as warnings pertaining to the use and handling of security deposits. Another example, is creating an exclusivity provision in cable contracts or homeowner association restrictions that prohibits installation of competing cable or satellite service given federal regulations requiring that this always be an option.

Solid Boilerplate

Yes, many feel that boilerplate in contracts is just padding intended to justify an attorney's billing, but in reality the boilerplate provisions of a contract can be just as important as its main terms. For example, provisions pertaining to dispute resolution can affect how and where you can bring legal pressure against the other party in the event of a breach. An attorney fees provision can determine whether it will be financially viable for you to pursue a breach claim in the first place. Provisions for signing in multiple counterparts and integration of all the terms of the agreement into the contract can even affect whether the contract is valid or applies to particular circumstances.

There are, of course, numerous other elements of a contract that a skilled attorney will want to investigate, but they are simply too numerous to include in a single article such as this. If you are in the process of preparing a contract, or determining whether you should accept one, you should contact an experienced contract attorney who can help make sure your agreement contains all of the provisions it needs to

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.

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