Contract Negotiations

by Chris Swiecicki

Warning to Real Estate Developers: Get a Lawyer On Board Before You Contract with Engineers and Architects

A large part of real estate development requires entering into contracts with architects, engineers, and construction companies. The contracts can be complex, and worth millions…and if something goes wrong, someone will be left holding the bag—most often the developer.

The best way to avoid such problems is by making sure your contract language is clear and comprehensive. This is usually done by hiring an attorney to help. Such a contract is less likely to be challenged in court, too.

That said, real estate development contracts is one area where a firm’s expertise is essential. Without proper experience, too much can go wrong, given the complexity of these kinds of cases.

For example, I myself am currently representing a real estate developer who is alleging a breach of contract in the development of two properties. We are bringing suit against the engineering firm hired by the developer, and I am also defending the developer against the engineering firm’s countersuit. The complex nature of this case underscores the need for clear, concise contracts that cover a wide array of possible circumstances and eliminate confusion. And since even the best contracts may be challenged, the lawsuit also highlights the importance of having experienced and knowledgeable legal counsel should litigation be necessary.

Details of the Breach of Contract Lawsuit

The lawsuit in question was recently detailed in an article in the St. Louis Business Journal. Our client, Alpha Tulip, LLC was organized in 2017 and in January, 2018, bought vacant land to develop. One property was to be a residential house in Chesterfield, and the other a $7 million senior housing development in Hazelwood. 

Alpha Tulip hired THD Design Group, a company providing civil and geotechnical engineering, surveying, and construction management.

Our Client’s Suit

The current lawsuit was filed on behalf of Alpha Tulip against THD in December 2023 for failure to complete services in both Chesterfield and Hazelwood.

According to Alpha Tulip, when THD was in charge, it failed to have licensed engineers represent the company at site inspections of the Chesterfield residential property. As a result, alleges Alpha Tulip, the project was rejected with 26 objections. Among the issues, they say, was THD’s plan for a retaining wall that was a known violation of the city’s requirements.

In Hazelwood’s public hearings regarding the senior housing development, Alpha Tulip alleges that THD engineers lacked the skills and knowledge to respond to the city’s questions. As a result, the city rejected the project.

In 2019, THD abandoned the project. It did not provide Alpha Tulip with its plans and drawings, forcing the developer to start over with a new engineering firm. Ultimately, the plans were approved.

The Countersuit

In its countersuit, THD claims it ceased work in 2019 due to Alpha Tulip’s failure to pay for engineering services amounting to just over about $7000. They filed a mechanics lien on the residential property for the amount. It was later voided and released in August 2021.

THD insists Alpha Tulip’s claims of breach of contract are meritless and that THD did everything it was required to do with regards to both cities. Further, THD accuses Alpha Tulip of filing suit in the first place as a ploy to avoid paying the outstanding balance. 

The Importance of a Specialist in Contract Law

At the core of this case is the contract between Alpha Tulip, LLC and THD Design Group. Alpha Tulip hired THD to perform a service that was left incomplete. 

THD’s counterclaim focuses on Alpha Tulip withholding payment as a reason for stopping their work. Its attorneys argue that there was nothing in the contract that said payment was contingent upon either project’s acceptance by the appropriate municipality. 

All contracts have an implied covenant of good faith and fair dealing. Beyond that, crafting a contract involves anticipating likely scenarios to mitigate the risk for both parties. As this case works its way through the legal process, attorneys for both sides will assert their interpretations of how the contract defines the expectations and obligations of each party. Ultimately, a judge will weigh in on the final decision.

This is why it is so important for legal help with business contracts. A contract law specialist can draft a strong contract, and if necessary, defend its intended meaning in court.

When You Need a Business Litigation Attorney

Alpha Tulip, LLC has employed Swiecicki & Muskett since its inception. Having a contract lawyer who is also a business litigation attorney onboard should prove to be a definite advantage in both bringing this lawsuit and defending against the countersuit. 

The best time to partner with a business attorney is before problems arise. Their skills are indispensable for setting up a business entity properly, drafting and reviewing contracts, and if it becomes necessary—representing the company in court. 

For help with establishing your business, creating ironclad contracts, or litigating on your behalf, contact Swiecicki & Muskett.

by Chris Swiecicki

When is the Right Time to Bring in an Attorney for a Business Contract?

Every business, no matter how small, will eventually need to enter into some type of transaction that requires a formal contract. Small business owners may be tempted to draft a contract themselves or choose from online sources that promise easy-to-use contract templates. They may not feel the need to involve an attorney unless something goes wrong. 

While we understand the desire to save time and money with a DIY approach, a one-size-fits-all solution can not possibly capture the nuances of every unique business transaction. There are very good reasons for contacting an attorney early in the process rather than waiting until there is a dispute, even if only for a quick review. Understanding when it’s best to involve a professional will help prevent errors, misunderstandings, or omissions that can lead to costly outcomes.

Four Key Times to Involve an Attorney

Unless a business is big enough to have its own legal department or a corporate attorney on retainer, the question of when to bring in an attorney for a business contract is bound to come up eventually. Even in-house counsel sometimes brings in an outside specialist. Some contracts might need the expertise of a patent lawyer or tax attorney, for example.

While having a lawyer draft or review every single contract might mitigate the majority of risk for a company, it isn’t always feasible—or necessary. Executing simple contracts like a bill of sale or a standard lease agreement may not require a professional’s help.

In general, a more realistic answer of when to call an attorney is whenever a contract involves complex ideas or when the terms of the agreement have high stakes. For example, ironing out the complicated details of a merger or acquisition is something that definitely needs an attorney’s expertise. So does something like negotiating the terms of a licensing agreement for an invention. In both examples, a mistake in the contract could cost millions of dollars, lock one or both parties into an unfavorable situation, or put the company’s future at risk.

We have identified four times when it is in a business owner’s best interest to get professional contract help. 

1. When Asked to Sign a Contract

When presented with a contract, the need to have a lawyer review it increases along with the stakes or dollar amounts involved. For example, a multi-year service level agreement with a retailer for your company’s product merits an experienced lawyer’s opinion. On the other hand, an agreement with an independent contractor for a single project in exchange for a set fee is fairly cut and dried. 

Still, there is value in having an attorney review a contract to make sure there are no surprises. They can explain the terms so their client completely understands their rights and obligations as well as what will happen if one party does not meet their part of the bargain. If a business owner foregoes the help of a professional, there could be unanswered questions. For example, can the independent contractor in the above example be compelled to complete the work? When is payment due and what type of penalty or interest will be charged if it is not paid on time? 

2. When You Want to Formalize an Agreement 

An oral agreement can be legally binding. But you’ve probably heard the saying “A verbal contract is not worth the paper it’s written on.” Written contracts lay out the details of an agreement to avoid confusion and safeguard the interests of both parties in a court of law. As soon as it is evident that an agreement with another party needs more than a handshake and a promise, it is time to draft a formal contract.

As with #1 above, the need for an attorney will depend on the importance and complexity of the transaction. Hiring an attorney to draft the document will ensure that nothing is missed and that the terms have the intended results for both parties. As an alternative, a business owner could ask a lawyer to review and recommend changes to a document the business owner drafted.

3. When a Business Changes

The two previous examples involve new contracts. Existing contracts should be reviewed periodically, especially when either party undergoes a major change. For example, a company expanding its services to include delivery might consider tweaking the terms spelled out in its client contracts. Will they promise delivery in a certain time frame? Will there be an additional fee? What recourse does a customer have if they do not receive their items? A contract attorney can make sure the wording still represents the company’s best interests while covering all new considerations. 

4. When a Market or Industry Changes

Just as with company changes, similar adjustments should be made to contracts when a business owner anticipates industry changes. Consider 2023’s labor dispute between the Writers Guild of America and Hollywood studios. The increased use of Artificial Intelligence in the industry triggered the WGA to demand changes in how their work was represented and compensated.

Similarly, any company might see changes ahead for the type of work it does. An experienced contract attorney can structure a contract and adjust its language to accommodate changes when necessary.  

Pitfalls of a Poorly Drafted Contract

A good contract safeguards the rights and clarifies the obligations of both parties. A poorly drafted one, however, could result in a number of unpleasant outcomes. There could be few options in the case of a breach. A business might not get paid, may be forced to provide unanticipated products or services, or could end up in litigation. 

All of these situations could end up more expensive and disruptive than hiring an attorney to draft or review the contract in question. By bringing in an attorney for a business contract—and bringing them in early in the process, business owners can rest assured that their contracts won’t have the following issues:

• Ambiguity. Every contract can be subject to interpretation, but clear, concise professional language will eliminate confusion.
• Not enforceable. Contracts must follow the laws of the jurisdiction to which they apply. For example, requiring a non-disclosure agreement from an employee in a state where NDAs are not legal, would not hold up in court. 
• Omitting key points. Attorneys know how to close loopholes and will think of issues their clients might not anticipate. For example, adding an arbitration clause to a contract allows disputes to be handled out of court. And a termination clause gives parties a way out in certain situations.
• Unforeseen risks. Not considering a variety of eventualities can increase risk exposure. That said, a written contract naturally includes an Implied Covenant of Good Faith and Fair Dealing for both parties’ protection.

While any contract can suffer from issues that could lead to litigation, a professional contract attorney is less likely to make a mistake than a layman. Lawyers understand the meaning and implications of contract language and how the document should be structured. 

What a Contract Lawyer Brings to the Table

Hiring a contract attorney puts business owners at an advantage over those trying to draft a document themselves. An experienced lawyer will take the time to understand their client’s goals and the purpose of the contract. They can prevent a business owner from entering into an agreement that does not serve the interests of the company, or worse, harms it.

It is important to find an attorney familiar with the local jurisdiction and who has participated in litigation when contracts are breached. This experience gives them the ability to craft a strong document that provides the assurances and protections the company needs. 

A Contract Attorney Can Safeguard Your Business Interests 

Whether a business contract is an occasional necessity or part of day-to-day operations, these documents and their contents should not be taken lightly. Errors, vagueness, or the exclusion of important points can lead to costly mistakes and even litigation. Often the expense and inconvenience are much greater for a company than hiring a lawyer from the start. 

For all but the simplest agreements, contact an attorney who specializes in contract law like Swiecicki & Muskett. The higher the stakes of a transaction, the more important it is to get professional advice. The future of your business could depend on it.

 

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by Chris Swiecicki

Looking for Business Contract Templates? Read This First

In the world of business, contracts keep transactions running smoothly. Contracts define the rights and obligations of the parties involved and provide the legal framework for business relationships. Online contract templates offer businesses an accelerated, often inexpensive way to get some legal coverage and ensure their interests are represented. After all, having a written contract is generally better than not, and having some legal protections is better than having none.

Still, there are potential shortcomings that online contract template sites don’t always disclose. Businesses need to be aware of these before they choose to gamble their business on a templated contract.

Where Online Contract Templates Fall Short

To be clear, I am not saying that online business contract templates always fail. If you have a small business and you need a contract for a simple, repeatable, common task, then an online contract might well cover all the necessary bases and be a valid approach. However, if there’s anything more complex about a business situation, be it the deal itself or something unique about your business structure or practices, it’s unlikely that a templated contract will adequately cover those unique facets. A good contract protects the interests of the business, especially when the other party acts in bad faith. Here are some specific areas where a contract template might not fully cover your business:

Risk Mitigation

Contracts are about more than rights and obligations. They can be powerful tools for risk management. However, risk isn’t universal. What might be non-risky for the average business could be an existential threat to yours. A templated contract is written with the average business in mind and may miss areas where your company is uniquely legally exposed. For example, all contracts expire or have a termination date at which point all provisions cease. Companies may need what’s called a “survival clause,” which continues after the contract’s expiration, and may cover things like confidentiality, indemnification, warranties, and intellectual property rights. Without having a lawyer draft or review your contract, you may inadvertently open yourself up to substantial risk. 

Addressing Unique Needs

Of course, there’s more to contracts than risk. Every business has unique circumstances and goals, and contracts can help advance those. One of the most significant advantages of having lawyers write your contracts is the human element. Lawyers can get to know you and your business and ensure that the final contract is tailored to your specific needs. Not only does this result in a legally stronger contract, but it ensures that your contract is comprehensive and relevant and minimizes the potential for disputes in the future. For example, you may be selling a business but plan to keep a handful of customers for yourself after the sale. A standard online contract template might not cover this type of transaction. 

Protecting Intellectual Property

If your company has any intellectual property (IP), such as patents, trademarks, or copyrighted work material involved in a project, then it’s a good idea to make sure that it’s protected. You don’t want to sign a contract that gives over your IP to another party—or even opens the door for a dispute. Even if you ultimately prevail in an IP case, handling one can be a huge distraction for your company, moving you from innovation and efficiency to a desperate fight to protect what’s rightfully yours. Given the range of what IP can include, from inventions and artistic works, to brand names and logos or trade secrets like formulas and practices, it’s uncommon for online contract templates to fully and effectively protect businesses in this area.

Legal Precision and Compliance

Like any legal document, contracts need to comply with relevant national, state, and local laws. Failure to comply could result in penalties or, in certain circumstances, render the contract null and void. So, while the contract you find online might be compliant in one jurisdiction or another, it might not be compliant in yours. For example, many states allow non-compete clauses in employment contracts, but they’re essentially outlawed in most cases in California. Even if an online template can handle that nuance, there’s a chance that laws have recently changed, and using outdated language can get you in just as much trouble. By hiring a lawyer, you can ensure that you’re getting a contract that’s up-to-date and compliant.

Clarity and Avoidance of Ambiguity

One reason that many people use contract templates is that legal language can be dense and difficult to parse. It’s not that lawyers love big words, but rather that being clear and resolving ambiguity is critical for avoiding disputes and winning them if they do arise. Templates often use generic language, which may or may not be truly effective at ensuring clarity. Such generic language can actually increase the odds of a misunderstanding down the line.

Furthermore, your online contract template generator isn’t going to be able to advise you on the best path for negotiation and dispute resolution. In some cases, that might be arbitration or mediation, saving you time and money. In others, that might not be legally viable or not desirable for various reasons. No matter how good your online tool is, it’s never going to be able to understand the broader context in which a contract is being created, so it won’t be able to help you drive the outcomes that you’re seeking.

When to Enlist a Lawyer for Contracts

A theme in these shortcomings in online contract templates is that contracts aren’t one-size-fits-all. Instead, to be truly effective, they need to be customized to the specific circumstances at hand. That’s not to say that a failure to do so represents an existential threat to your company. In some cases, poor phrasing in a contract could lead to your business having to spend more time and money to complete a project, destroying your margins in the process.

You never want to be forced to choose between that scenario and a possible breach of contract. Ultimately, using online contract templates is sometimes safe. But, if you find that your business or the particular contract you need falls into one of the categories we covered above, then it’s a good idea to hire a lawyer to take a second look, to make sure you’re covered and to avoid mistakes like the misplaced comma that cost Lockheed Martin $70 million.

How Swiecicki & Muskett Help with Business Contracts

At the end of the day, it’s important to invest your resources wisely. However, if you’re having a lawyer review the contract, why not just have them write it for you in the first place? In that case, you’ll get a custom contract for your business with the legal precision, risk mitigation, and clarity needed to protect your interests and reduce the likelihood of a costly dispute down the road. That’s far better than what you’ll get from any of the online legal document alternatives. You’ll also have a lawyer to help navigate the negotiation process. If your company needs a solid contract to help keep its interests protected, contact Swiecicki & Muskett today for a free, no-obligation consultation. 

by Chris Swiecicki

Keep it in the Family? Why Family Businesses Need a Good Attorney, Too

A family business can become a lasting legacy, passed down for generations. But professional and personal interests don’t always mix as well as everyone hopes. Even the closest families can find themselves at odds. 

While some might prefer to keep family conflict to themselves and resolve issues privately, it is better to find a lawyer to help out a family business. A family business lawyer can be a neutral, unbiased advisor who keeps the company on track and maintains family harmony. 

Safeguarding a Family Business

Family businesses come in all sizes—from a mom and pop shop or siblings’ startup to a multi-million dollar company with thousands of employees. Their defining feature is the fact that two or more family members operate the business and have majority ownership and control of its operations. Roughly 19% of companies in the U.S. are family-owned.

While family ties and shared values are often at the heart of these businesses, those things won’t guarantee success. Only 30% of family businesses survive into the second generation. Only 12% are intact by the third. 

It’s easy to guess why this is true. In addition to all of the issues that any company faces, a family business also faces family dynamics that make business decisions more complicated. Conflicting ideas, egos, and personalities are not just matters for the HR department—they can be deeply personal matters that can harm both the business and close relationships.

Sometimes there is a desire to keep family issues private, but that can compound the problem. A better option is to find a business lawyer who the family members trust. A family business attorney can help structure the company and its operations to withstand disagreements and drama that can come with a family business. 

A Catalog of Common Family Business Challenges

Launching a new business with a family member, or bringing a child or sibling into an existing business should be handled carefully—because, unfortunately, the initial sense of camaraderie and togetherness can sour with time. 

These are some of the issues to consider when family is involved:

• Old grudges, sibling rivalries, and trust issues can come to a head when family members have to work together. 
• Conflicts with non-family employees can arise if there is nepotism or members of the family are held to lesser standards.
• Being related can make reprimanding or firing someone difficult.
• Disagreements about the company’s direction can interfere with important business decisions (for example hiring and firing, business expansion, selling assets, mergers and acquisitions).
• Unclear boundaries can lead to business matters spilling over into personal life, and vice versa.
• Personal events (birth, death, illness, marriage, or divorce) can complicate the structure and ownership of the company. 

Anticipating and planning for potential problems like these can increase the chances of a family business’s long-term success. Preparing by getting legal advice should be considered realistic, not pessimistic. 

It’s human nature to think that one’s own family is different and would never let personal feelings stand in the way of success. But no one can predict what will happen over time. A parent might need to reprimand or even fire their child. One sibling might decide they want to leave. Two cousins could both assume they’ll take control when the owner passes away. Or an ex-spouse (or other non-family member) could inherit part ownership due to a sudden death.

Having a lawyer to help out a family business is beneficial. They can plan for possible future scenarios like these so the company and its employees are protected.

The Role a Corporate Lawyer Can Play in a Family Business

There are several ways in which a corporate lawyer can make life easier for family businesses:

Structuring the Business. How the business is structured will affect how much say each family member has in the company. How much does each person want to be involved in day-to-day operations? Will they be active partners or just investors? Will the levels of ownership be equal? Will major decisions be made by a primary person, by the majority, or will everyone need to agree?

These are all things an attorney can help make official. Ideally, this should happen when the business is formed. But a lawyer can be brought in at any time to consult and get things set up properly.

Drawing up documents. A business lawyer can advise whether the business should be an LLC or a corporation and assist in drawing up  or revising the necessary documents such as articles of incorporation, bylaws, operating agreements, non-disclosure agreements, and shareholder agreements. 

Attorneys will also recommend and write various contracts directly related to family businesses. For example, family employment policies, exit provisions, conflict resolution protocols, shared capital strategies, and even prenuptial agreements. Having these instruments in writing can help to diffuse future arguments by providing a blueprint for what should happen or who should make decisions should a crisis arise.  

Solidifying succession plans. In a broader sense, it is important for a lawyer to help out a family business in clarifying their vision for the future and put policies in place to ensure it. One of the most important, yet most neglected things to consider is succession planning. Only 34% of family-run businesses have a documented succession plan. In other words, there is no plan for transitioning from the current owner to the next if that person retires or passes away. Not only have family business owners not thought about how they will hand over the reins, most have not even decided who will take over. A survey taken of business owners who expect to retire within five years found that 47% had not yet named a successor. 

This can leave family members in limbo about the future. (The entire hit TV series Succession is based on this premise.) And it can be catastrophic if something happens unexpectedly to the primary owner. A family business lawyer will see that there is a clear plan in place and that wills and powers of attorney are current. This allows the company to carry on with a smooth transition, despite a tragic event.

Other Ways a Business Lawyer Assists Family Businesses

Many family business lawyers become trusted confidants and valued members of the team. As such, they might be called upon to provide guidance on various business matters. These are just some of the services families might take advantage of:

• Formalizing family members’ roles and responsibilities and the leadership structure.
• Assisting members in separating their business and personal finances.
• Creating exit plans and non-compete agreements for family members leaving the company
• Advising on tax implications of things such as opening a new location, buying or selling assets, going public, or a corporate lawsuit.
• Crisis management and litigation when necessary.
• An unbiased sounding board and go-between to facilitate communication among members.

A Business Lawyer Should Be Part of the Family Business Team

Every business should have an attorney who can help them create the necessary documents and establish the corporate structure. For a family business, the need is even greater because of the possibility of personal conflicts interfering with business operations.

There is much more invested in a family business than just money. There is a greater sense of pride and dedication that can make it something special. But there are also personal feelings and emotions that can be its downfall. 

Chris Swiecicki’s extensive experience in business law, taxation, and employment law has given him a deep understanding of what it takes to make a family business succeed. He is happy to discuss strategies that will help keep your family business legacy intact for the next generation and beyond.

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by Chris Swiecicki

What Happens When Labor Union Contract Negotiations Break Down?

From time to time, contract negotiations stall between small businesses and their union employees. This scenario can seem daunting for businesses relying heavily on union labor, especially if they are trying to handle negotiations without an employment lawyer. 

Employment lawyers help business owners make informed, rational decisions. They explain their rights and responsibilities under federal labor laws and prepare them for the possibility of a strike.

Stay Calm During Contract Negotiations

If negotiations break down, it is essential to stay calm. This may be easier said than done, but remember, there are ways to manage the situation and the goal is to bring the other party back to the table. It is not uncommon for negotiations to hit a few bumps in the road and it is important not to let these setbacks derail the entire process.

Mediation and Arbitration in Labor Union Negotiations

One option to consider if negotiations stall is mediation. This involves bringing in an impartial third party to help facilitate discussions and work toward a resolution. If mediation does not work, a company might consider arbitration. In this process, a third party makes a decision that is usually binding on both sides. Both options can help break the deadlock and move the negotiations forward.

Strike Management During Labor Union Negotiations

When negotiations break down, one of the most significant concerns for business owners is the possibility of a strike. Strikes can disrupt their business operations, impact their bottom line, and strain relationships within their workforce. However, understanding the nature of strikes and how to manage them effectively can significantly mitigate these challenges.

Types of Strikes

A strike occurs when workers collectively decide to stop working to protest against terms of employment, such as wages, working conditions, or other contractual stipulations. Strikes are a powerful tool in the labor union’s arsenal, directly impacting the company’s ability to operate normally.

However, not all strikes are the same. The nature, legality, and impact of a strike can vary depending on several factors:

Authorized Strikes: These are strikes that the union has officially approved following a vote by its members. They are typically organized and coordinated, with clear objectives and demands.

Wildcat Strikes: These are spontaneous strikes that occur without the official authorization of the union. They can be unpredictable and challenging to manage and are frequently the result of worker dissatisfaction. Wildcat strikes can be illegal, especially if they violate the terms of the existing labor contract.

Sympathy Strikes: These occur when workers strike in support of another group of workers who are striking against their employer. This type of strike can extend the impact of a labor dispute beyond the immediate parties involved.

Economic Strikes: These strikes occur due to disputes over wages, benefits, working conditions, or other economic factors. Economic strikes are generally legal, provided they adhere to specific rules and regulations.

Unfair Labor Practice Strikes: These occur in response to an employer’s alleged violation of labor laws or regulations. These strikes can happen anytime and are not limited by an existing contract.

Managing Strikes

Effective strike management is crucial to companies to minimize disruption to their business and work toward a resolution. Here are some strategies to consider:

Preparation: Anticipate a strike and have a contingency plan. This could involve training management and non-union employees to take over essential roles or hiring temporary workers to maintain operations.

Communication: Maintain open communication lines with the union representatives and their employees. Transparency about their position and willingness to negotiate can help to de-escalate tensions.

Legal Counsel: Ensure access to experienced legal counsel to advise executives on their rights and responsibilities during a strike and to help navigate labor laws and regulations.

Negotiation: Continue contract negotiations during a strike. The aim is to reach a resolution that satisfies both parties and ends the strike as soon as possible.

Maintaining Order: In the event of a strike, it is important to ensure the safety and security of all parties involved. This might include coordinating with local law enforcement or private security to manage picket lines and maintain order.

Remember, strikes are a symptom of underlying issues in the negotiation process. While managing a strike effectively is important, the ultimate goal should be to address these issues and reach a fair and sustainable agreement with the union.

Contract Negotiations: Getting Back to the Bargaining Table

Ultimately, the goal is to get back to the bargaining table. Employment lawyers help guide the contract negotiations toward a resolution that is in everyone’s best interests. It is essential to approach these discussions with an open mind and a willingness to compromise. Remember, the goal is not to “win” the negotiations but to reach a fair and sustainable agreement for both sides.

After all, while a breakdown in labor union contract negotiations can be challenging, businesses navigate this process successfully with the proper legal counsel, a calm demeanor, and a commitment to finding a resolution. Remember, the goal is not to defeat the union but to work with them to agree upon a contract that benefits everyone involved.

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by Chris Swiecicki

Three Kinds of Conflicts Where a Corporate Lawyer is Essential

“Corporate law” is a broad category involving all legal issues of establishing, managing, and operating a corporate entity. But at the same time, it is a highly specialized area of practice. Out of the 1.3 million attorneys in the American Bar Association, less than 15,000 are classified as corporate lawyers. Within this group, there are specialties within the specialty. For example, an attorney might focus their practice on a niche such as mergers and acquisitions or intellectual property.

So what is corporate law, exactly? At its core, the discipline is about business relationships and the contracts that define them. What does a corporate lawyer do? While the job description can cover a lot of ground, in essence, they advise companies on their legal rights and responsibilities in regard to those contractual relationships.

What Is Corporate Law?

The basis of all corporate law lies in mandatory and default provisions that create a framework for how every corporation operates. Mandatory rules are non-negotiable and all corporations must conform. Default rules are exactly that: the practice that is followed unless the parties forming the company provide an alternative way of doing things. Default provisions can not, of course, violate federal, state, or local laws. 

For example, a commonly accepted practice is that a merger can be approved by a majority vote of all outstanding shares. A corporation can opt instead to require 60%, 75%, or some other amount. 

An example of a mandatory provision is the rule that all publicly traded companies must provide regular detailed financials in a prescribed format. It is not something a corporation can avoid.

These new rules are spelled out in a corporate charter, also known as articles of incorporation. Articles of incorporation are fundamentally a contract between the company, its shareholders, and the incorporating state.

What does a corporate lawyer do to help with these issues? They can assist with corporate governance, which is the system of rules, processes, and practices that guide a company. They iron out the details and spell out exactly how the business will be structured and operated. 

In creating this framework, corporate lawyers anticipate the conflicts that may arise among the various stakeholders. They can then ensure that the corporate charter is clear and fair to all parties involved.

The Three Relationships That Result in Corporate Conflict

While a corporate entity can be seen as having a single goal, the corporate structure includes stakeholders with conflicting interests in the business. For example, a company might have managers whose main focus is productivity and efficiency. Meanwhile, the company’s employees value good working conditions, fair pay, and generous benefits. Creditors want to be paid in full and on time. And shareholders hope for ever-increasing profits. 

All of these objectives can define a successful company. But few corporations can accomplish all of these things without a push and pull between stakeholders. It is the job of a corporate attorney to interpret corporate law and help the business resolve these conflicts when they arise. 

It’s worth noting that corporate lawyers are not on the side of the shareholders or the employees. Instead, they represent the corporate entity itself. They handle these three common conflicts with the best interests of the company in mind.

1. Managers vs. Shareholders

Shareholders of any company are by nature concerned with the return on their investment, and associated tax implications. This is sometimes at odds with corporate management who may be willing to sacrifice some short-term profits in favor of growing the business or maintaining its competitive edge. 

For example, the management team at a manufacturing company may be in favor of a large capital investment in new automated technology. The price tag is high and it could take two to three years before its full benefit is felt in the bottom line. The shareholders are not willing to see their dividends suffer and are against the purchase.

A corporate lawyer can help negotiate the dispute between the two groups and help them come to an agreement that will be in the best interests of the company.  

2. Controlling vs. Minority shareholders

Companies with majority shareholders and minority shareholders can be prone to conflict. Not only do minority shareholders have less control than those with controlling interest, nor do they have the protection of a contract like employees, vendors, or creditors do. 

In one notable case (Halpin v Riverstone National, Inc.) minority shareholders won a class action lawsuit against majority shareholders who voted to proceed with a merger without including the minorities in the vote.

The remedy for this would have been to include explicit provisions in a company’s articles of incorporation. Corporate law is generally written to add protections by either empowering minority parties or limiting the advantages given to majority shareholders. For example, minority shareholders might be given special voting powers, reserving a certain number of seats on the board for them, or assigning veto powers or key committee roles. 

When the rules are broken, or if there is no specific language addressing a situation, litigation may be necessary.

3. Shareholders vs. Non-Shareholders

There are several groups of stakeholders who are not shareholders. These parties include employees, vendors, creditors, and even the community where the corporation does business. The nature of these parties’ roles with the company can be a source of conflict with shareholders.

A good example of this is a case brought against IBM by its employees in the early 2000s. Lou Gerstner was credited with rescuing IBM with massive layoffs and overhauling its pension plan to help cut costs. Not only were shareholders thrilled, but Gerstner walked away from the job in 2002 with an annual salary of over $1.5 million and a pension of more than $1.1 million. 

When an executive’s compensation comes at the expense of its employees, it is a clear conflict of interest. The employees won the case and the company agreed to pay $320 million in a settlement to current and former employees. 

While this is an extreme case, corporate law deals with any conflict between a company’s stakeholders. The law lays out the rules for all to follow and corporate lawyers interpret the law so the parties can come to a consensus that benefits the wellbeing of the business as a whole.

A Corporate Lawyer is an Asset

Whether a company is big enough to employ in-house counsel or an entire legal department or is small and just needs occasional legal advice, finding an experienced attorney is a must.  

These legal professionals are indispensable when drawing up a corporate charter and deciding on issues of corporate governance. Once a company is established, they can advise on all contractual and legal matters involving the various stakeholders, and resolve conflicts as they arise.

The firm of Swiecicki & Muskett Attorneys at Law has extensive experience in corporate law, particularly in the areas of compliance and taxation. Contact Christopher Swiecicki to discuss your company’s needs.

Cover Image by independenz by Canva.com

by Chris Swiecicki

7 Tips for Preparing for Contract Negotiations

Running a business involves managing risk in many forms, from economic downturns to severe weather. One risk has more influence over a company’s success than any other: how well its leaders manage contract negotiations.  

Without skilled, experienced leaders at the table, businesses may suffer financially in employee contract negotiations. They also may settle for less in deals with business partners, or pay too much when buying or renting property.   

Many companies minimize risk by engaging an attorney for contract negotiations. Attorneys help businesses with large and small deals, from vendor agreements to merger contracts. When companies follow their attorney’s advice on how to prepare for contract negotiations, they are in a much better position to achieve their goals. 

Advice from a St. Louis Attorney for Contract Negotiations 

Tennis great Arthur Ashe said, “One important key to success is self-confidence. An important key to self-confidence is preparation.” Business leaders who spend time preparing for contract negotiations are more confident at the negotiating table. 

Our firm helps clients gain confidence before negotiations. Here are the steps we recommend for maximizing returns and minimizing risk in contract negotiations:

1. Research the other party. Read the company’s website and news articles about it. Search for news of earlier deals and try to glean the terms of the deal. You want to understand the company’s financial position or time constraints on reaching an agreement. This information will help you negotiate from a place of power—one in which you are confident and able to predict how the other party will react to your actions.   
2. Create and share a draft contract. If your business is making the proposal, develop a baseline draft of the contract, then share it with the other party.  The baseline draft includes the most important terms of the agreement, what your company is willing to accept, and room for writing in changes. Present the draft to everyone who will be at the negotiating table in plenty of time for them to review it.  
3. Break up complicated negotiations. Large companies often face contract negotiations that go on for days. If you expect a long, tedious, process, think about breaking up the negotiations into several components, then agree upon the terms of each part separately. This will reduce stress and fatigue for both parties, resulting in better decision-making and ultimately, better results. 
4. Prioritize objectives. Decide on which objectives to focus on before contract negotiations begin, using the SMART goal format to put parameters on the goals. Objectives may include your bargaining range with an optimum number, as well as minimum and target goals. The optimum number is where you want to start negotiations. The minimum is the least you will accept, and if the other party does not offer it, your company will walk away. Hitting the target goal is the objective of the contract negotiations.   
5. Decide which terms are non-negotiable. Meet with your team and agree upon what must be in the contract. Then, when you arrive at the negotiating table, firmly tell the other party about your non-negotiables.  
6. Determine concessions. Contract negotiations usually include one party offering the other a concession, or trade-off. Negotiators need to know beforehand how to proceed when the other party offers a concession and what trade-offs their own party will offer. Concessions must be managed carefully during the negotiation. By deciding the concessions to offer and accept beforehand, you are decreasing the likelihood of a hasty decision that hurts your position.  
7. Set your intention for a win-win outcome. There are several styles of negotiating. We recommend the style focused on win-win results because they get better results and lay the foundation for more productive conversations in the future. Set the stage for win-win negotiations by arriving at the negotiating table with your mind set on treating the other party as a valued business partner. When you are respective, cooperative and collaborative, not combative, the other party most likely will respond in kind. 

Take your time while working through these seven steps and do not put off preparation. You do not want to feel rushed at any point in the contract negotiations to avoid hasty decision-making. 

Preparing for Mergers and Employee Contract Negotiations

Preparation for contract negotiations varies based on the type of contract. Two of the most consequential types of business contracts are merger contracts and contracts with unionized workers.

Details to Include in a Merger Contract

I draw on decades of merger contract experience to guide business owners through preparation of a merger contract. The contract spells out the terms and conditions of the two or more businesses that are merging. The owners will agree to sell all stock and assets to the new company at the price stated in the merger contract. The newly created business will be a single new legal entity. 

Follow these steps to prepare for signing a merger contract:

• Determine the value of the other business(es) and your own. You can do this yourself with extensive research or hire a business appraiser.
• Compare the values and decide whether you will need additional resources to invest in the business. 
• Make a list of assets and liabilities of both businesses.
• Prepare a contract for the purchase of assets or stock or a corporation.
• Plan how to transfer ownership.
• Create an operating plan.  

Ask a contract lawyer to review the merger contract before you transfer ownership. 

Minimizing Risk During Employee Contract Negotiations

Attorneys for contract negotiations advise organizations on two types of employment contracts: individual employee contracts and contracts with employees represented by labor unions. 

Companies with unionized employees have many layers of rules to work through that are explained in the National Labor Relations Board’s guidelines on collective bargaining rights. Organizations have a legal duty to negotiate in good faith, but the law does not require reaching an agreement with the union. The consequence of a breakdown in negotiations may be a strike which may disrupt the economy and delay delivery of essential services for weeks.

Organizations minimize conflict with their employees’ unions when they begin preparing for employee contract negotiations months or weeks in advance. Steps to take include: 

• Form a negotiating team. Most negotiating teams include one or more labor professionals, a human resources professional, an operations executive, a senior finance executive, and a frontline supervisor.  
• Assess organizational and employee needs, then develop objectives for the contract negotiations.
• Draft a new contract. If questions surfaced about certain aspects of the current contract, clarify the matter in the new contract. The same goes for adding solutions to problems that arose with the current contract. Adjust the current contract for anything new such as facilities, more gig workers, or employee training. 
• Prepare for information requests. Negotiators may ask for data and other information about the organization to support their requests. Be prepared by anticipating their needs. 

Preparation for union contract negotiations also must include creating a robust strategic communications plan. Organizations must take steps to control the narrative and minimize conflict. 

If your organization uses contracts for individual employment, preparation can be handled internally with on caveat. Ask an attorney to review all contracts to ensure nothing has been overlooked or misconstrued. 

When it Comes to Contract Negotiations, Experience Matters

Every contract includes unwritten rules attorneys understand.

Christopher Swiecicki ensures his clients know what they are agreeing to and that they must abide by them. If they do not understand the contract they sign, they risk a battle in court. Chris’s experience ranks him in the top contract and mergers and acquisitions attorneys in St. Louis. Contact him online or by phone at 636-778-0209 for a consultation on contract negotiations.

Cover photo by Rido by Canva.com

by Chris Swiecicki

What is the Difference Between a Merger, an Amalgamation, an Acquisition, and a Takeover?

As a small business owner, one of your long term goals could be to sell your business, or acquire another one to expand your reach. Either way, it’s a big decision, and understanding the different ways companies can combine with each other will give you more options and a greater understanding of the potential outcomes.

There are four main types of business combinations: Mergers, amalgamations, acquisitions, and takeovers. Each one serves a different strategic outcome, and only you can decide which one is ultimately the best match for your goals.

Mergers

A merger is a strategic move where two or more companies combine resources and operations to create a new entity. A merger is usually a mutually agreed-upon decision to expand market reach, diversify product lines, or enhance operational efficiency.

Mergers represent strategic decisions businesses make for a variety of reasons. At their core, mergers are about growth and consolidation. They provide an opportunity for companies to expand their market reach, gain competitive advantages, and increase their market share. Unifying resources, talent, and operations between the merging entities achieves this.

One of the key reasons why a company might opt for a merger is to expand into new geographical areas. Suppose a company is seeking to grow its business in a specific region. In that case, it may merge with another company already operating in that area. This allows the merging company to leverage the local market knowledge, presence, and customer base of the existing company, thus facilitating a smoother and more effective expansion. Another significant motivation for pursuing a merger could be preventing an unprofitable business’s closure. If a company struggles financially, merging with a healthier company could infuse it with the necessary resources and stability to turn its fortunes around. This saves the company from potential bankruptcy and helps preserve jobs that might otherwise be lost.  Additionally, mergers can lead to cost efficiencies through economies of scale. By consolidating operations, companies can eliminate duplicate departments or functions, saving costs. This could result in lower customer prices and increased profitability for the newly merged company.

A merger or acquisition is a complex legal process. It starts with evaluating the economic value of the deal, followed by meeting statutory requirements, drafting legal documentation, and conducting due diligence. After the merger, the focus shifts to effective integration management. A merger and acquisition attorney is critical to the process, offering high-quality advice, risk mitigation, and negotiation skills.

Amalgamations

An amalgamation is similar to a merger but usually involves more than two companies. In an amalgamation, multiple companies combine to form an entirely new company. The existing companies cease to exist, and the new entity takes over their assets and liabilities. This strategy is often adopted to achieve more significant economies of scale or to consolidate resources. None of the combining companies survive as independent legal entities in an amalgamation. Instead, they dissolve and form an entirely new company.

Amalgamations can streamline operations, reduce overhead costs, and improve financial performance. For instance, the combined entity can eliminate duplicate departments or functions, resulting in operational efficiencies and cost savings. From a legal perspective, an amalgamation involves due diligence to inspect all aspects of the target companies, from operations to intellectual property.

The process also requires compliance with statutory requirements, which vary depending on the size and sector of the firms. The amalgamation is formalized through a legal contract, and a critical phase post-amalgamation is managing the integration of the companies.

Acquisitions

In an acquisition, one company (the acquirer) purchases another company (the acquiree). The acquirer takes control of the acquired company, which becomes part of the acquirer’s business, and the acquiree’s identity ceases to exist. This strategy stimulates growth, gains competitive advantages, or increases market share, giving the acquirer a greater presence and influence in its industry. There are several compelling reasons why a business might want to pursue an acquisition. One key motivation is to improve the performance of the target company. The acquirer may identify opportunities to significantly reduce costs, improve margins, and enhance cash flows within the target company.

​​As mentioned, an acquisition is when one company buys most, if not all, of another company’s ownership stakes to take control. From a legal perspective, this involves a series of steps.  A thorough analysis of the economic value of the deal is undertaken. If the value is positive, the buyer proceeds to meet any statutory requirements that may apply, depending on the size and sector of the company being acquired.  The acquisition also necessitates conducting financial and legal due diligence to reveal relevant information for the buyer. This process involves the seller providing all supporting documents and answering a due diligence questionnaire. The transaction is formalized through legal documents, often a sale and purchase agreement.

Takeovers

A takeover is a type of acquisition that can be friendly or hostile. In a friendly takeover, the target company’s management supports the transaction. However, in a hostile takeover, the acquiring company pursues the purchase despite opposition from the target company’s management or board of directors.

A takeover occurs when an acquiring company aims to assume control of a target company, typically by purchasing a majority stake. The process often involves making a bid for the target company’s shares. If the takeover is successful, the acquiring company gains control over the target company and its resources, which can significantly impact its market position. There are several strategic reasons why a business might want to pursue a takeover. For instance, if a company’s existing products are in the later stages of their life cycles, it may be challenging to achieve organic growth. In such cases, a takeover allows for the acquisition of new products or services and the expansion of the business portfolio.  A takeover is a legal process in which one company acquires control of another by purchasing most of its stock. From a legal standpoint, this involves careful due diligence, which is a thorough investigation of all aspects of the target company.

It’s also crucial to comply with any statutory requirements related to the specific industry or size of the firms involved. The takeover is formalized via legal documents, often a sale and purchase agreement, if a single entity owns the target.

Differences Among These Business Combinations

While all these terms represent ways of combining businesses, their processes, strategies, and outcomes differ. In mergers and amalgamations, the companies involved typically have a mutual agreement and shared objectives. The resultant company is a blend of merging entities, which often cease to exist in their original form.

By contrast, in acquisitions and takeovers, the identity of the acquiring company usually remains while the acquired company gets absorbed. The key difference between an acquisition and a takeover is the level of agreement from the target company, with takeovers potentially being done against the wishes of the target’s leadership. Each business combination has its own legal, financial, and operational implications. Ultimately, the best route to take would depend on the specific circumstances of the business and the owner’s strategic objectives. It would be advisable for a business owner to consult with a financial advisor or business consultant to understand the best options for their specific situation.

As a business law firm, we’re here to guide you through these complex processes and help ensure your business transition is as smooth and advantageous as possible. Contact us to discuss your options and embark on this pivotal business journey with confidence.

 

by Chris Swiecicki

Understanding Contract Law: The Implied Covenant of Good Faith and Fair Dealing

A legal contract’s basic function is to state the rights and obligations of each party. In addition, the document typically covers what will happen under a variety of possible scenarios. This list of stipulations can be quite lengthy, especially in contracts between corporate entities.

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