As a small business owner, the allure of saving money by forgoing legal review of contracts and agreements is understandable. However, taking this shortcut can have disastrous consequences that may far outweigh any upfront savings. One of our recent client experiences at Bayside Counsel illustrates just how risky this approach can be.
We represented a company in the process of acquiring an existing business via an SBA loan. The client wisely engaged us to review the closing documents. What we uncovered was shocking – numerous conflicting terms between the various loan documents as well as discrepancies with the facts surrounding the loan itself. Had our client blindly accepted and signed these documents without our review, the company would have been in default the moment the ink dried.
This situation highlights some dangerous assumptions small business owners often make that can lead them to gloss over contract fine print.
Four Problematic Assumptions
Assumption #1: Your business lacks bargaining power, so questioning terms is futile. This defeatist mentality is misguided. If a party is contracting with you, they are doing so because they want your business. Do not accept unfair or inaccurate agreements just to secure products, services, or financing. You have every right and responsibility to push back and negotiate terms that truly protect your interests.
Assumption #2: A larger, established counterparty has it all figured out. In our case, it was a major lender whose own documents were rife with glaring inconsistencies and errors – something the lender's own rep admitted most borrowers would not catch. Bigger does not necessarily mean better or more diligent.
Assumption #3: Having an attorney review will cost too much. While there is an upfront cost for experienced legal counsel, it pales in comparison to the potential fallout from contractual disputes down the road stemming from vague, unfair, or blatantly unfavorable terms. Preventative lawyering is one of the wisest investments you can make.
Assumption #4: We are dealing in good faith, so intense scrutiny is unnecessary. Even if you have the utmost trust in your counterparty's intentions, it is naive to assume complete competence or airtight documentation on their end. If the relationship sours, you can be sure they will leverage any provisions or ambiguities to their advantage – provisions you may have unknowingly agreed to.
Moreover, retaining legal support signals you are a savvy, well-resourced businessperson not to be taken lightly. It demonstrates you have the wherewithal to zealously advocate for your rights both at the negotiating table and in court if needed.
Protect Your Interests
At Bayside Counsel, we have seen firsthand how costly and destabilizing contractual conflicts can be for small businesses. It is in your business’ best interest to have prospective contracts and agreements – no matter how routine or from what source – thoroughly reviewed by an experienced attorney. Do not fall into the trap of thinking you cannot afford this protection – the risks are simply too high.
Protect your interests by contacting Bayside Counsel today for a consultation.