Beitchman & Zekian Blog

Legal Information in Plain English

Archive for contracts

Hindsight is 20/20

I had the pleasure of sitting in conference room with a client yesterday for 4 hours trying to settle a case during court ordered mediation.

While sitting waiting for the mediator to come back with the counter offer on the settlement, I looked at the “contract” that started the whole mess again.  It was clearly written by a non-lawyer and, since I had time to kill, I had to ask him why, if he’s got a firm of lawyers who he calls on a various other inconsequential matters, did he not call us to review this piece of paper. His response was that they were in too much of a hurry to get the deal done and start working with the Plaintiff and didn’t what to put the brakes on the deal by getting lawyers involved.

Now, I realize that time is sometimes a factor and businesses don’t want to invoice lawyers because we start nitpicking and arguing over whether it should be “and” or “or” in the sentence. Believe it or not, sometimes it DOES make a difference.  In this case, the difference between that document and the one I would have written would have protected them as opposed to opened them up to litigation.

Other times I’m told that they didn’t want to pay our hourly fee to have the deal reviewed because they thought it was fine. Well, it is until someone breaches the agreement, which is what happened in this case.  Before I could start my lecture, the client admitted that he should have had us look at that agreement, regardless of how much he would have paid.  Because now, it cost him more than $20,000 PLUS our hourly litigation fees to settle this case that could have been avoided had the agreement been drafted properly in the first place.

So, whether you are a multi-million dollar company or a small mom & pop shop, you should have an attorney review all documents you sign.  Sure there is a cost involved, but if you do your research, you’ll be able to find an attorney that suits your needs, both legal and financial.

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Contractual Arbitration Clauses…Or How Charlie Sheen Got Kicked Out of Court and Into Private Dispute Resoltuion

The events in Charlie Sheen’s life have become very public, for better or worse.  Regardless of your opinion of what is going on with him, the latest legal maneuverings by his attorneys and those of his opponent have provided a topic for this blog and information that is important for anyone who has ever or will ever sign a contract.

Very few people read the agreements they are signing from start to finish, and in neglecting to do so they do not know what the terms of the agreement are when it comes to dispute resolution.  Most people assume that if the contract is breached, there will be a lawsuit; this is generally the case, however more and more parties are including arbitration clauses in the deals.  What this means is that instead of taking a dispute to court and letting a judge and/or jury decide who is at fault and who is not, it goes to a private service and they assign it to an arbitrator – usually a retired judge or attorney – who acts as the decision maker.

The pros of working with an arbitration service is that the matter is private (court proceedings are public record) and it’s supposed to be on a faster schedule.  This may or may not be true as it can take the same amount of time to arbitrate as it would to litigate.

The cons are primarily the cost.  The parties must pay for the administrative services as well as the fees to the arbitrator who is the decision maker.  This can amount in to the tens of thousands of dollars and if one party can’t pay, the others have to pony up that share.  Additionally, unless it is decided prior to the arbitration in the agreement, the parties may not have any true procedural rules as you do in court.  Further, the arbitration fees and costs do not include your attorney’s fees which will also start to add up.

Now, if you, like in Charlie’s case, decide to file a lawsuit in court when you have an arbitration clause, the opposing party will likely file a Motion to Compel Arbitration – or basically a request to send the case to arbitration per the agreement.   So, if you don’t think you want to pay a lot of money to a private company for something that you can submit to the court and not have to pay all the extra fees, you would do well to contact a lawyer at the outset to review your contract before you sign it.  Forewarned is forearmed.

Get it in Writing

A lot of people go into business with family and/or friends.  A majority of people enter into these business relationships with a shake of the hand, maybe a couple emails back and forth, and an oral agreement.  People think it’s uncouth to request that everyone sign a contract; the excuse I hear most often is that it shows that you don’t trust the other person.  And really, who can you trust if you can’t trust family or a life-long friend, right?

Well, business and money and debt do strange things to people.  Business decisions that were once easy to make become points of contention and reasons for arguments.  One party may have invested more money that the other, but is expected to share in the proceeds equally.  We have seen brothers sue each other over small sums of money, marriages fall apart, and 20 year friendships go by the wayside.  Whatever the issue, you can be sure that at least one argument will come up that could have been avoided if there was some kind of agreement in place.

I tell people who are hesitant in asking their business partners to sign agreements and concerned with the cost that it is better to spend some money now to ensure that the original terms of the agreement are documented in order to protect both parties.  This will avoid the problems, headaches, heartaches, and costs later because you will have a document, which spells out the original intentions of the parties, to refer back to if there is a problem or dispute.

If you would like more information, or would like to discuss your business transaction needs, please contact our office at (818) 986-9100.

Love & Marriage…and a Prenup

Spring.  It’s the time of year when a young man’s fancy turns to thoughts of love.  Or so they say.  With about one third of first marriages ending up in divorce and approximately half of subsequent marriage coming to the same conclusion, it is no wonder that more and more savvy brides and grooms to be are addressing their financial planning through a prenup, especially those who own their own businesses, real estate, or, as we are in LA – home of the entertainment business, have worked for years on their scripts, music, or other intellectual property.

We all know the stigma of the prenup – why start the marriage with the idea that it will end?  For the same reason it is recommended that you speak with an estate planner sooner rather than later.  It is a contingency which provides for the financial security and well-being of the individuals who are making a commitment to stay together for the rest of their lives, but are realistic enough to know that marriage is not only the uniting of hearts, but of bank accounts and finances and when it comes to romance and money, one cannot know what the future will bring.

A prenuptial agreement (or sometimes an antenuptial or premarital agreement) serves the purpose of providing a roadmap with respect to the distribution of assets should a marriage end in divorce or death.  These agreements set out the consequences should one or both of the parties commit adultery, separate or divorce before a certain amount of time passes, or for the birth of children.  There are, of course, some prenups which address less common topics, for example monetary benefits or detriments based on weight gain, drug use, or spending habits.

Now, many people believe that because they are not heiresses, or multi-millionaires they do not need a prenup.  This is not true.  A prenup is useful to people of all socio/economic classes.  In fact if you have assets such as real property, stocks, retirement funds, intellectual property such as scripts, lyrics, songs, or films, or certain personal property you wish to protect and ensure is established as separate property; if you are pursuing or have already obtained a degree/license in a possibly lucrative profession (ie: law or medicine),  if you own all or part of a business, if you have elderly parents or family members who need care, if you have children or grandchildren from previous relationships, if one person earns more than the other or if you might be receiving an inheritance, you would do well to discuss a prenuptial agreement with your soon-to-be spouse and consult with an attorney.

If you have questions, or would like more information about prenuptial agreements or what can be protected under the prenup, please contact our office to schedule an initial consultation. If you’ve been asked to sign a prenup and you’re not sure about the conditions of the agreement or whether you and your property are protected, we can assist you with that as well.