Connecticut Business Contracts
When drafting Connecticut business contracts people sometimes find a contract on the internet and decide they can simply use that contract for their business or transaction they will be entering into, but in reality that is just the starting point. Even business attorneys in Connecticut start with their own templates they have used over the years and then make changes and modifications after talking with the client and carefully understanding the clients business needs. If you are looking for a Connecticut contracts attorney, you have come to the right place.
Typically, attorneys will ask the client a number of things about their business, so they understand some of its strengths and weaknesses. I typically do something called a SWOT analysis which stands for Strengths, Weaknesses, Opportunities, and Threats. This gives me a good understanding of the clients business.
When drafting Connecticut business contracts people sometimes find a contract on the internet and decide they can simply use that contract for their business or transaction they will be entering into, but in reality that is just the starting point. Even business attorneys in Connecticut start with their own templates they have used over the years and then make changes and modifications after talking with the client and carefully understanding the clients business needs. If you are looking for a Connecticut contracts attorney, you have come to the right place.
Typically, attorneys will ask the client a number of things about their business, so they understand some of its strengths and weaknesses. I typically do something called a SWOT analysis which stands for Strengths, Weaknesses, Opportunities, and Threats. This gives me a good understanding of the clients business.
Confidentiality Clauses in Connecticut Business Contracts
Properly drafting Connecticut business contracts also requires a good understanding of what the client is trying to achieve with the contract. Is the contract meant simply to formalize a purchase or sale transaction, or is it meant to protect a certain interest of the business like confidential information? Sometimes a Connecticut business contract has more than one purpose and so I will use many different clauses to both assist the client in the financial aspect of the transaction but also protect the client from possible risks or liabilities. Sometimes Confidentiality Agreements are just that, separate agreements, and sometimes a solid confidentiality clause can be used in various types of agreements.
Connecticut Business Contracts Areas Covered
Whether you are looking for a Connecticut business contracts attorney that covers Fairfield County and New Haven county, my office covers the entire State of Connecticut. I have a Shelton law office and a Stratford law office, home based, as well. I have handled numerous transactions including sales of companies, sale of business assets, marketing, licensing, and distribution transactions. I have drafted and negotiated numerous contracts including Operating Agreements, Founder Agreements, Shareholder Agreements, Joint Venture Agreements, Consulting Agreements and Independent Contractor Agreements. So, if you need a Connecticut business contracts attorney in the Shelton, Stratford, New Haven or Stamford areas, my background and experience are well-suited to handle your needs.
Joseph B. LaRocco is a business attorney that handles business contracts, business transactions, entity formations, and corporate governance.
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Founders' Agreements
Some startup attorneys will draft a separate Founders' Agreement, and then depending on whether they set up a limited liability company or corporation for the client, a separate Operating Agreement or Shareholders' Agreement. The founders agreement will be more specific to the specific type of startup and what the founders have agreed upon on how the company will be run, dilution, non-compete language, and buyout provision. The founders agreement may even be done before the LLC or corporation is formed so the founders at least have something in writing. The Founders' Agreement may then be replaced by the Operating Agreement or Shareholders' Agreement or remain as a stand alone agreement but the problem with that is the two separate agreements may conflict with each other in one or more respects so it is usually best to replace that agreement with an all-encompassing Operating Agreement or Shareholders' Agreement so the founding partners do not have to keep switching back and forth between two documents every time they have an issue that needs to be resolved. I always find that with Connecticut business contracts it is better to say it all in one agreement than in multiple Connecitcut business agreements that tend to make things confusing. A solid well-planned Connecticut business agreement will be easy for the founding partners to follow and avoid confusion.
Choice of Law Clauses – Why are they Important
This brings us to another important section in Connecticut business contracts. Choice of law clauses in a business agreement are particularly important. For instance, the applicable implied warranty of fitness for a particular purpose may be different in New York than it is in Connecticut. So, depending on whether or not I am representing a seller or buyer in Connecticut, I may actually decide to advise the client that the contract should be governed by New York law instead of Connecticut law because the client will have better contract protection. So now, a review of the law in those two states, and maybe even some pertinent case law analysis may be in order to advise the client on the issues involved.
Deciding on a Location
Now that you and the client have agreed on what state’s law should apply regarding future disputes, now you have to decide actually where the dispute will be heard. This is important because if one party to the contract has deeper pockets, they may insist that the dispute be decided on their home turf to make the other party spend more time, travel costs and legal fees battling in another state. You can just imagine if one party in in California and the other is in Connecticut the expense involved in having to bring witnesses all the way across the country. If it is a Connecticut business contract in which most of the work will be performed in Connecticut, then you stand a pretty good chance of the winning the argument that the dispute should be brought in and heard by a Connecticut court. Sometimes however, it is the money that call the shots. So if you have a big client and are going to get a good size fee from the work, you may acquiesce and agree to their home court.
Some Connecticut business contracts attorneys have come up with the idea of the location being based on who is bringing a claim to settle a dispute. If the party to the contract making the claim is in Connecticut, then the location for mediation, arbitration, or litigation will be in California where the other party is located. Likewise, if the party to the contract making the claim is in California, then the location for mediation, arbitration, or litigation will be in Connecticut where the other party is located. The reasoning behind this type of location choice is that the parties will really try to put their heads together and be reasonable in working out a solution before bringing an adversarial action that usually does not benefit either party.
Some Connecticut business contracts attorneys have come up with the idea of the location being based on who is bringing a claim to settle a dispute. If the party to the contract making the claim is in Connecticut, then the location for mediation, arbitration, or litigation will be in California where the other party is located. Likewise, if the party to the contract making the claim is in California, then the location for mediation, arbitration, or litigation will be in Connecticut where the other party is located. The reasoning behind this type of location choice is that the parties will really try to put their heads together and be reasonable in working out a solution before bringing an adversarial action that usually does not benefit either party.
What is Better Mediation, Arbitration or Litigation
Clients need to have a good understanding of the pros and cons of the various forums they have to choose from when it comes to settling disputes and disagreements. If the matter is one of “disagreement” regarding contract interpretation or a matter that was not clearly covered in the contract, then mediation or arbitration is very well suited for settling such issues. On the other hand, if it is a non-payment issue or non-performance issue and the other side was clearly wronged, and it is more of a matter of proving the amount of damages to be paid then that would be more suited to arbitration or litigation. It is very important to address this in Connecticut business contracts.
The majority of clients I have represented regarding Connecticut business contracts matters, partnership agreements, joint venture agreements, confidentiality agreement terms, finder fee agreements, independent contractor agreements, distribution agreements; licensing agreements, and employment agreements choose arbitration as the choice of forum to settle their disputes.
Pros of Choosing Arbitration – Arbitration is faster and overall, less costly than litigation in CT and that is true of most states. Based on those two factors, I typically tell my clients about these advantages and usually they agree so I will place an abitration clause in their Connecticut business contracts. The filing fees to start the arbitration are more, but since it moves quickly and is not subject to filing all the motions and delaying tactics some attorneys often employ, it tends to cost much less in attorneys fees. Another important factor is that arbitration awards are rarely appealable and once filed with the court and made a civil judgment, they are as good as gold, as long as the losing party has assets you can collect against. So if that sounds like a good way to settle disputes then consider putting an arbitration clause in your Connecticut business contracts.
Cons of Choosing Arbitration – If you are looking for a well-reasoned decision, the arbitrators do not have to provide a memorandum of law and findings of facts as to why they decided the matter the way they did and how they calculated damages in favor of the winning party. So, wherther the parties are located in CT, NY, or FL you will not get the satisfaction of getting the reasoning behind the arbitrator’s decision. If there are motions to be filed to dismiss the case, or you are looking for pre-judgment solutions, you will not get them with arbitration.
Pros of Choosing Litigation – Motions can be filed to take advantage of certain pre-judgment solutions like a motion to dismiss, motion for summary judgment and you can even ask the court to attach certain assets if you can show the defendant is a flight risk, may hide assets or may file for bankruptcy protection. The initial filing fee to get the case started is less than arbitration. You can request a jury trial. If the matter is heard by a judge without a jury the judge is required to issue his/her findings of fact and conclusions of law as to why the case was decided the way it was. Connecticut business contracts should have a section that either specifies litigation or arbitration, rather than not addressing the issue at all.
Cons of Choosing Litigation – While the filing fees are less, since cases can sometimes take two or three years to get to trial, the legal fees associated with motions, discovery, depositions, and subpoenas can add up to many thousands of dollars. Since there are many procedural issues to be handled during the trial, the same matter being heard by the court or jury can take twice as long as the same matter being heard in arbitration. The losing party can always appeal the decision and prolong it farther, while an arbitration appeal is almost always a waste of time because the courts routine uphold arbitration awards unless it can clearly be proven there was bias on the part of the arbitrators. The party with the bigger bank roll can use litigation to stall and wear down the smaller party.
The majority of clients I have represented regarding Connecticut business contracts matters, partnership agreements, joint venture agreements, confidentiality agreement terms, finder fee agreements, independent contractor agreements, distribution agreements; licensing agreements, and employment agreements choose arbitration as the choice of forum to settle their disputes.
Pros of Choosing Arbitration – Arbitration is faster and overall, less costly than litigation in CT and that is true of most states. Based on those two factors, I typically tell my clients about these advantages and usually they agree so I will place an abitration clause in their Connecticut business contracts. The filing fees to start the arbitration are more, but since it moves quickly and is not subject to filing all the motions and delaying tactics some attorneys often employ, it tends to cost much less in attorneys fees. Another important factor is that arbitration awards are rarely appealable and once filed with the court and made a civil judgment, they are as good as gold, as long as the losing party has assets you can collect against. So if that sounds like a good way to settle disputes then consider putting an arbitration clause in your Connecticut business contracts.
Cons of Choosing Arbitration – If you are looking for a well-reasoned decision, the arbitrators do not have to provide a memorandum of law and findings of facts as to why they decided the matter the way they did and how they calculated damages in favor of the winning party. So, wherther the parties are located in CT, NY, or FL you will not get the satisfaction of getting the reasoning behind the arbitrator’s decision. If there are motions to be filed to dismiss the case, or you are looking for pre-judgment solutions, you will not get them with arbitration.
Pros of Choosing Litigation – Motions can be filed to take advantage of certain pre-judgment solutions like a motion to dismiss, motion for summary judgment and you can even ask the court to attach certain assets if you can show the defendant is a flight risk, may hide assets or may file for bankruptcy protection. The initial filing fee to get the case started is less than arbitration. You can request a jury trial. If the matter is heard by a judge without a jury the judge is required to issue his/her findings of fact and conclusions of law as to why the case was decided the way it was. Connecticut business contracts should have a section that either specifies litigation or arbitration, rather than not addressing the issue at all.
Cons of Choosing Litigation – While the filing fees are less, since cases can sometimes take two or three years to get to trial, the legal fees associated with motions, discovery, depositions, and subpoenas can add up to many thousands of dollars. Since there are many procedural issues to be handled during the trial, the same matter being heard by the court or jury can take twice as long as the same matter being heard in arbitration. The losing party can always appeal the decision and prolong it farther, while an arbitration appeal is almost always a waste of time because the courts routine uphold arbitration awards unless it can clearly be proven there was bias on the part of the arbitrators. The party with the bigger bank roll can use litigation to stall and wear down the smaller party.
Important Clauses for Connecticut Business Contracts
In addition to the confidentiality, choice of law, and arbitration or litigation clauses mentioned above, there are a number of other clauses that should be considered. Depending on the type of contract you are entering into or being asked to sign, the relationship of the parties, and the subject matter of the confidential information that is sought to be protected, these are the additional clauses I often consider and decide whether or not to incorporate in Connecticut business contracts for my clients.
Non-circumvention Clause
Just because the parties are agreeing on what is confidential information and what needs to be protected does not necessarily mean that the Connecticut business agreement will prevent one of the parties from using the confidential information to his or her benefit to cut out the other person from a finder's fee, commission, or other form for compensation.
Non-solicitation Clause
Another problem to be aware of in Connecticut business contracts is the ability and possibility of one party to the agreement soliciting clients or customers of the other party to cut that party out of a fee, commission or other form of compensation, which should have at the very least be divided up between the parties. Non-solicitiation clauses are tricky and should be carefully drafted by an experienced Connecticut business attorney. While every contract has implied covenants of good faith and fair dealing, don't take it for granted that your partner or counter-party to that Connecticut based agreement will be honorable if there is an opportunity or gray area that he or she can take advantage of if it is not specifically spelled out in the agreement.
Non-compete Clause
Drafting an effective non-competition clause in Connecticut business contracts requires an understanding of Connecticut case law and employer-employee regulations. While Connecticut courts do not like to impose an undue burden on employees or other parties to an arms-length contract, they will look at fairness, the territorial restriction the contract places on the parties, the length of time the non-compete clause if to be effective and the basis for the non-compete-clause. A ten mile restriction or a county or town restriction may be deemed fair depending on the circumstances, but Connecticut courts (based on case law decisions) seem to have a problem with two year restrictions and have been know to reduce the time period restriction to one year. The restriction itself may be deemed reasonable if there is a legitimate purpose involved, like training, cost, a customer list that was developed over years of building good will, or a fee paid to the party for the purpose of the non-competition clause which is additional consideration the restricted party would not have otherwise received.
Warranties and Disclaimer
For instance, a sales transaction may include disclaimers as well as warranties. It could be the item being sold or the project is only for a specific purpose. So, there may be a need to include language as to an implied warranty of fitness for a particular purpose. This implied warranty is actually part of the Uniform Commercial Code which was published in 1952 and covers the sale of goods.
§ 2-315. Implied Warranty: Fitness for Particular Purpose.
Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.
The Uniform Commercial code or “UCC” has been adopted by the great majority of states and is basically an attempt to standardize or synchronize the laws involving the sale of goods and other commercial transactions in the United States. Unfortunately, while most states have adopted the UCC, some states have revised certain portions of the language so an attorney that drafts Connecticut business contracts needs to review the applicable Connecticut statute and cannot simply rely on the UCC language.
Conclusion
Making sure your attorney understands you needs is especially important no matter what type of contract you require. An experienced business attorney will be able to ask the right questions, advise you on various options and discuss certain issues that you might not have considered. Whether because of Covid-19 restrictions, travelling time or if you are just to busy to have an in person legal consultation, my office can arrange a Zoom meeting, skype video call or just a phone call.
If you have any questions regarding Connecticut business contracts you are entering into and need help interpreting or revising an existing agreement feel free to call for a free consultation.
If you have any questions regarding Connecticut business contracts you are entering into and need help interpreting or revising an existing agreement feel free to call for a free consultation.