Pub. 2 2013 Issue 1

Summer 2013 15 The following contractual provisions are just a few samples of some of the provisions you should consider including, avoiding or modifying in your contracts. 1. Assignment Provisions. The general rule in most jurisdictions is that a contract may be assigned (in other words, the party with whom you contracted and for whom you must perform or who must perform for you, can change) unless the substitution would materially change the duties or risks of the parties or the contract specifically precludes assignment. Although there is some protection against contracting with a competent party with the financial wherewithal to perform as expected and ending up with an incompetent party with no financial wherewithal, a clear restriction on the assignment of the contract can save a lot of time and energy. It can also prevent some potentially bad situations that have nothing to do with performance. For example, if you have a loan with a bank and that bank assigned the loan to the financing department of one of your competitors, would you want your competitor to have access to all of the financial information you are required to provide in connection with the loan? By Chad R. Ensz, Partner McKenna Long & Aldridge LLP M ost auto dealers are signing multiple contracts every day. It is a common occurrence and those contracts with customers are most likely form documents favorable to the auto dealer that are never modified other than filling in blanks. Therefore many auto dealers are comfortable with contracts and do not spend much time worrying about the boiler plate provisions with other contract- ing partners such as service providers. In most cases, these boiler plate provisions will never be read again. However, they can have a profound impact on the value of the contract and the outcome of disagreements when problems arise. Understanding these provisions and their potential impact on future litigation and negotiations is very important. On a similar note, you need to consider how assignment provisions may impact your plans for the future. An assignment provision can be an impediment to the sale of your business in certain circumstances and depending on the structure of the sale. A sale of assets usually includes an assignment of key contracts. Even a stock sale or merger can trigger anti-assignment provisions that are written to include such events. It is very important to think through various possibilities and to consider how the assignment provision in a contract could further or hinder your goals. 2. Integration Provisions. Often times people will discuss the terms of a contract or provide oral summaries. I often see situations where one side will question why the contractual terms do not appear to be consistent with oral agreements and are told not to worry about it, that is just how the contract is written, but the performance will follow the oral agreement. The problem is that many contracts have an integration clause which effectively integrates all prior and oral discussions and negotiations into the contract so that the terms of the contract itself will supersede all other understandings or agreements not specifically Continued on page 16