Contracts are a fact of life for a small business owner.  Employment agreements, vendor contracts and even the lease for your storefront or office are all contracts.  It is vitally important to understand all the different provisions found in these agreements, but I frequently hear clients state that they sign contracts without understanding or even reading them because “it’s all just boilerplate.”  In other words, since all contracts contain those provisions, they can’t be changed, so why bother to understand all the terms?

Those impossible to understand legal terms are the ones that will get you into the most legal trouble.  Not understanding what you are signing may lead to very expensive lawsuits and settlements.

Guest blogger Jonathan Ezor has started a series over at entitled Demystifying Legalese in Contracts.  This week he gives a clear, concise explanation of the choice of law and forum clause.  As he explains, the choice of law clause tells the small business owner which state’s laws will be used to interpret the contract.  The forum clause tells you in which state your dispute will be heard.  In other words, you might be forced to defend a lawsuit in a state different than the one your business is located in.

Once you understand what you are agreeing to, you or your small business attorney can negotiate more favorable terms.  Don’t assume that just because the contract is on a standard or pre-printed form that it cannot be negotiated.  Once you understand what you are signing, you will know how to reach the best agreement for both parties.

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