I have been a Texas business contract attorney for over 28 years and continually watch clients make the same mistakes in drafting a business agreement whether they live in smaller areas such as Midland, Lubbock, Amarillo, or Abilene or the large urban areas of Austin, San Antonio, Dallas, and Houston. Whether we are discussing a simple Texas vendor contract or a more complex transaction, basic rules of construction will help avoid big legal problems later on for our Texas clients. Here are some tips to consider when drafting an agreement:
- Texas Contract Terms Must Be Detailed.
A basic element of contract law in Texas is that your terms must be very clearly stated. That may seem obvious to anyone reading this article, but it is typically a problem when non-lawyers are involved. The important takeaway is to reduce the details to a term sheet before including them in any contract. Make sure that all of the details are in place and that nothing is left for explanation later on as that could be a problem.
2. Make your Texas entity is the contracting party.
Make sure that the Texas entity and not the individual is on the agreement. This may seem basic but is often overlooked in contracts in Texas and elsewhere. Always designate your Texas LLC or Texas Corporation as the responsible party and definitely make sure that when you sign the agreement it is never in your personal capacity and only as an officer of the entity itself. Failure to do so will impose personal liability on you which can be a nightmare.
3. You need a provision for recovery of attorney’s fees in Texas.
Make sure there is a provision for the recovery of Texas attorney’s fees in the event of litigation in any court in the state of Texas including the major urban centers in Austin, Midland, Dallas, and Houston. Technically, any breach of contract allows for recovery of attorney’s fees under Texas law but it is better to require that in the actual agreement so there is no ambiguity.
4. Avoid all ambiguities.
Speaking of ambiguities, avoid them at all cost, as your adversaries will attack a Texas contract on this basis and particularly the urban areas of Midland, Austin, Dallas, and Houston where there may be greater attention to detail. Ambiguity means that a term is not clearly defined. Never use a term unless it is clearly stated and expressed.
5. Add a merger clause in your Texas Contract.
Be sure to add a merger clause in your Texas agreement. The purpose of this clause which is also called an “integration clause” is to provide that the written agreement is the final agreement between the parties and cannot be superseded or altered by alleged prior written or oral contracts. This critical clause will safeguard your hard work and minimize the potential for litigation.
6. Also add in an arbitration clause in your Texas Contract.
Adding an arbitration clause is usually a good idea. Arbitration which usually references the American arbitration Association provides for the private disposition of any dispute without the need to involve the court and attendant costs. Arbitration clauses in Texas are almost always enforceable and provide a lower-cost solution to disputes which can easily arise.
7. Watch out for specialized contracts in Texas.
Texas contractors entering into any transaction in Texas should consult an attorney given the amount in controversy. Typically, these agreements are styled as Texas Master Service Agreements and define the relationship of the contractor to the General Contractor. These contracts can severely limit the client’s rights and ability to recover the original investment let alone any profit. Given the complexity and amount of controversy, it is recommended that an attorney with experience in this area provide a thorough review.
Remember, there is no right to a business attorney in Texas and to proceed without one is at your own peril. Always best to never cut corners and get excellent Texas legal advice.
With over 34 years of experience in the area of contract law and review, the Moster Law Firm is ready to help. Feel free to give us a call for a complimentary review of your situation.
