If you operate a business, you probably interact with customers, employees, vendors, lenders and perhaps even landlords. These relationships affect almost all business owners. And when it comes to relationships, each party has their own set of expectations.

This is where a business contract can make a real difference. What are your employees or vendors expecting of you? What can you expect from your landlord or lender? The business contract describes and defines these expectations, clearly outlining terms and conditions, as well as the consequences when things go wrong.

When all parties know and understand their rights and responsibilities, disputes occur less often. If a dispute should arise, the contract provides a solid framework for resolution.

In creating any contract that promises payment for services rendered, an important first step is determining that the owner (the business owner or the property owner) has the ability to pay. “Owner ability to pay” clauses can provide contractors and subcontractors with the authority to obtain the owner’s financing information in order to make an ability-to-pay determination.

Professional firm contracts often include an attorney’s fees clause, also known as a prevailing party clause. This is a contractual provision ensuring that the plaintiff in a legal case is obligated to pay the defendant’s legal costs in the event the plaintiff loses the case. In other words, the clause attempts to prevent meritless claims. Most claim settlements include a fees and costs waiver, so the provision may never come into play. However, if you are the one on the receiving end of monies due, you will appreciate the bargaining strength such a clause can provide.

How might this clause be written? Here is one typical example:

“In the event of any litigation arising from or related to this Agreement, or the services provided under this Agreement, the prevailing party shall be entitled to recover from the non-prevailing party all reasonable costs incurred including staff time, court costs, attorney’s fees, and all other related expenses incurred in such litigation.”*

A Mechanic’s Lien is another type of contractual tool used by owners and subcontractors.  A subcontractor working for a general contractor who files bankruptcy can file a Mechanic’s Lien to ensure payment for a project.

In our economically challenged times, the Mechanic’s Lien reduces risk for the subcontractor, who can file the claim for unpaid bills against real property he or she has improved with labor or materials. In a bankruptcy scenario, the Mechanic’s Lien also allows the subcontractor to enforce lien rights against a non-debtor third party (most often, the owner of the improved property).

Mechanic’s lien laws are complex, so do not hesitate to seek the services of a qualified business attorney to ensure your rights are protected.

Need assistance negotiating, drafting or reviewing business contracts in Missouri? Please contact the attorneys at Quinn Estate & Elder Law.

*Always consult an attorney on these matters. This is only an example.