Surely you have entered into many contracts in your life for your most basic needs without ever reviewing them, i.e. credit cards, housing, employment, transportation. While many of these do not have any ability to be altered, other contracts, both personal and business, can and should be reviewed and revised. Additionally, there are certain provisions and issues that you may find in a contract, that you should pay specific attention to, consider the potential impact, and potential downfalls you should avoid. The following are a few common issues you should consider when entering into a contract in Florida.
1. Signing, even as a Corporate Officer, can still leave you open to personal liability.
When signing a contract on behalf of an entity, it is important to make sure the signature block contains the correct signaling terms to identify that the signature is solely on behalf of that entity and based on your position as a corporate representative of the company and not your signature individually. Generally, the signature should be proceeded by the word “by” and accompanied by language identifying the signor’s corporate capacity. I.e. “by: John Doe, as President of ABC LLC”.
However, while this is an important step to insure you will not be held personally liable for the terms of the contract, in Florida, the concern does not end
there. It is important to make sure that no language in the contract indicates personal liability, the assumption of personal obligations, or any personal guarantee language by the signatory. If such language is included, simply signing the document as a corporate representative may not be enough to limit your liability and the language contained in the contract could impose personal liability upon you, even if you signed on behalf of an entity.
2. Attorneys’ Fees should be included (or at least considered) in the contract; without a contract provision, they may not be available.
The American Rules regulating an award of Attorneys’ Fees in the United States, which is followed by
Florida, is that opposing parties must pay their own attorneys fees and costs regardless of the winner (or outcome) of the case. While this is the default rule, there are certain exceptions where the losing party can be required to pay the attorneys’ fees of both parties: (1) when a specific statute requires it; and (2) when they are included in contract.
When reviewing/preparing a contract, consider including a “prevailing party attorneys’ fee” provision where, should the contractual relationship lead to litigation, the prevailing party’s attorneys’ fees would be paid by the losing party. While this provision cuts both ways, it is generally prudent to include the provision, rather than to avoid it.
3. Mandatory Mediation is good thing.
When a business dispute results in litigation in Florida, many Judges will order the parties attend mandatory mediation at some point in the case before the case will be tried. Additionally, if mediation is requested by a party, Florida Statutes state that a Judge must refer the case to mediation unless an exception is present. The justification is two-fold. On one hand, it forces the parties to attempt to come to an amicable resolution without the need for further litigation, and on the other hand, it clarifies the issues between the parties, identify strengths and weaknesses, and bring into focus the end goals of each party; all of which can
assist the parties (and the Court) in litigation moving forward if the case is not resolved. Considering your case will more than likely be ordered to mediation, it is prudent to consider a mediation provision in your contract that forces the parties to mediate before the litigation is instigated in the first place. Requiring mediation on the front end and including it in your contract could save all parties vast amount of time, expenses, and the overall headache of having to go through protracted litigation when a potential resolution could be reached at mediation. Importantly, be sure this is a mediation provision rather than an arbitration provision. Arbitration provisions should be avoided in most scenarios.
4. Indemnification language should be perused and completely understood.
Indemnification provisions are a vital part of any contract and, generally, each party should seek to indemnify themselves from the actions of the other. It is critical that indemnifications provisions are carefully drafted to eliminate any ambiguity and thoroughly reviewed to ensure understanding and compliance with Florida law. Depending on the nature of the contract, there are various Florida statutes that may apply and could limit or otherwise expand indemnification to a point other than what you intended in the contract. Ultimately, failing to consider the ramifications of an indemnification provision could place you in a position that you did not intend or foresee.
5. Forum selection clause.
A forum selection clause stipulates that if any conflict were to arise, the litigation must occur in the specific venue chosen. This can be a very beneficial provision when you are drafting a contract and one to watch out for in contracts prepared by the other party. For example, a larger company headquartered out of state may select New York as the forum for all litigation. This can place you, at best, in an inconvenient situation, and at worst, potentially make it too expensive or untenable to bring suit in some far-off jurisdiction. Conversely, including a forum selection clause selecting Orange County, Florida, when you and your company are located there, provides a level of comfort for you, and prevents an unhappy party from attempting to bring suit in another venue.
This article is for informational purposes only and you should seek professional legal advice before taking any action based on this article. Further, this information is subject to change due to the rapidly changing legal, political and business environment.