While I like to think I can “lawyer my way” through a contract, the reality is that I never went to law school. However, I have learned a lot from several talented, and patient, attorneys who took the time to explain things to me and answer countless questions.
If I were to single out one thing that I have learned from some of these talented people it is this.
The number one lesson is this. There are no legal issues, there are only business issues.
The best attorneys I have worked with approach everything as a business decision that requires opportunity vs risk assessment. A great lawyer understands the risk reward equation and provides guidance accordingly.
Let me point to some examples that make my point. Keep in mind, I am not a lawyer, these are a few terms you may think are “legal issues” – they are not.
Indemnification – comes up all the time in technology agreement and is designed to have one side protect the other if something goes wrong. Big companies often want the start up to indemnify them for a number of things, trademark infringement, intellectual property violations, software bugs and so on. This really hinges on control. How much control do you, as the start up, have over things that could go wrong. You never expect your API or app to cause damage or violate IP in New Zealand. Should you give the other party protection for any and every case? Think about how much control you have over distribution, marketing, other software that is not yours but, could cause problems.
Limitation of Liability – You may hear the term “capped” or “uncapped” and if you remember one thing, never agree to uncapped. The risk should be tied to the commercial opportunity. So, if you as the start up have a guarantee of $10M in revenue then you can agree to take on more risk, maybe as much as $10M or more. But if you do not have any sort of guarantee you can measure, you want to limit your liability. Why take on substantial risk when there is no assurance of the upside?
Jurisdiction – “who cares where hold arbitration?” You will if you end up in having to arbitrate or worse yet go to court. In addition to the cost of hiring local counsel and traveling to a location hundreds or thousands of miles from your office, local courts may have a reputation for favoring one type of claim or party.
There are a number of other examples such as intellectual property, reps and warrants and defined terms that tie directly into your business. If you are not sure how, a good attorney will provide the advice so never hesitate to ask how something can impact your business.
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