Mitigating Risks When Drafting Business Contracts

AdobeStock_516820932-300x200There are many risks involved with entering into any contract. Business litigation costs time and money that interferes with efficient business operations. The best way to mitigate the risk of a business contract is to hire an experienced Los Angeles business attorney to draft your contract with as much protection as possible. At Structure Law Group, our skilled Los Angeles business litigation lawyers know how to prevent disputes in the drafting phase, negotiate dispute resolution during the contract performance, and litigate disputes in court when necessary.

Financial Protections

Some contract provisions provide financial protection. Insurance requirements, for example, can provide financial security against the risk of loss. Los Angeles business owners can also create financial protection with a liquidated damages clause. This contract provision imposes a set monetary fee, that a breaching party is required to pay in the event that they breach the contract. It is not designed to be a penalty, so courts will usually not enforce liquidated damages provisions that are not closely tailored to the party’s actual financial losses. But setting the amount of these financial losses ahead of time provides one party with financial security in the event that the other party breaches the contract. It also sets a financial incentive to encourage both parties to comply with the contract.

Cybersecurity and Data Protection

In recent years, large companies have seen some of the largest data breaches in history. Hackers have demonstrated the vulnerability of cyberinfrastructure, even in supposedly “secure” systems, which has led to millions of dollars in security losses, upgrade fees, and even ransom payments. Los Angeles business owners must prepare for cybersecurity in their daily operations. When dealing with other businesses, it is important to ensure that neither party puts the other’s data at risk. Contract provisions can require security infrastructure, system upgrades, antiviral software, or added layers of protection (such as two-factor authentication). All of these steps help mitigate the risk of contractual liability for a data breach.

Legal Protections

Most Los Angeles business owners use contracts to create enforceable legal rights. When drafted properly, contracts can offer legal protection. For example, the contract might provide for an award of attorney’s fees to allow the aggrieved party to litigate the contract in court. Business contracts can also remove certain legal protections. One common example is an arbitration clause. Arbitration is a useful tool that helps some parties negotiate their differences without the time and expense of litigation. If, however, your business is subject to a binding arbitration clause, you might lose the opportunity to litigate your dispute in court or have a jury determine what your losses are. It is important to be very clear on the legal protections that your business is gaining in a contract and the legal protections that it is forfeiting. Our Los Angeles business litigation attorneys help clients understand their contractual rights when drafting a client, throughout contract performance, and when negotiating or litigating contractual disputes.

Experienced Los Angeles Business Litigation Lawyers for All Business Contracts

The experienced Los Angeles business litigation lawyers at Structure Law Group have experience drafting, negotiating, and litigating all types of business contracts. Call (408) 441-7500 to schedule a consultation or contact us online.