3. Bad Contracts
Liability: Given the time and expense involved with executing appropriate contracts, many companies attempt to cobble together parts from existing contracts or forego written contracts entirely. Most of the time, both parties perform their obligations and bad drafting never causes a problem. The company repeats the process until a problem arises. Unfortunately, the types of problems that arise can bring the company’s operations to a grinding halt. In these situations, inartfully drafted contracts can actually be worse than having no contract at all.
Improper assessment of a company’s existing intellectual property portfolio, information technology procedures and existing security policies can have catastrophic consequences. Acting, or failing to act in accordance with the language of the cobbled contract can gut a company of its intellectual property and rain down costly and time consuming lawsuits. Even if your lawyer drafted you an appropriate contract, if you do not inform your key personnel of important contractual provisions, they may inadvertently breach the terms of the contract, in turn, leading to large liabilities for your company.
Solution: It is critical that you coordinate with your intellectual property attorney to develop comprehensive contractual strategies to prevent any of your intellectual property from slipping through the cracks. Rigorous review of third party contracts is also essential to ensure the availability of an exit strategy for you and to prevent overreaching contract provisions from crippling your company.
The time and cost associated with drafting appropriate contracts and bringing your key personnel into the fold may seem burdensome initially. Over time, however, as templates for particular strategies emerge, the time and costs decrease. Compared to the time and costs associated with litigating misdrafted or absent contract points, proper contract preparation translates into a huge cost savings.