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Contracts 101: Understanding the Legalese of Business Transactions

You’ve heard these words of advice countless times: Read the fine print before signing any contract. But all too often, simply reading a contract isn’t enough to fully understand its legal implications.

This is especially true of contracts for complex business transactions. Such agreements can contain terms or provisions that require further explanation by a trained legal professional in order to know exactly what you and the other party are committing to when you sign on the dotted line.

What is the Right of Rescission?

For instance, you may think that once the document is signed, it’s a done-deal. Neither party can back out of the agreement, right? Well, hold on. Some contracts come with what’s known as a right of rescission.

In Florida, the right of rescission is commonly referred to as the “cooling-off rule.” If you enter into a contract for future services on a continuing basis, you generally have the right to cancel within three days after signing the contract. The same three-day rule applies to consumers who enter into contracts during the course of a home solicitation sale, meaning the transaction for the purchase of goods or services took place in a home that is not the main or permanent place of business of the seller.

When a contract contains a right of rescission, there are specific procedures – such as written notification – that must be followed in order for a party to back out of the deal. If those steps aren’t followed to the letter, the rescission may not be valid and the terms of the contract are subject to enforcement.

What is a Forum Selection Clause?

Another contract provision that catches some people by surprise is a forum selection clause. Such clauses state that in the event of a legal dispute, the case will be litigated in a particular court in a particular location. In other words, the maker of the contract has already selected the place, or “forum,” where any lawsuit will be heard.

A Florida couple who operated an AAMCO Transmission franchise in Hollywood, just outside of Miami, made headlines in the National Law Review because of a forum selection clause in a contract to which they were a party.

The franchise agreement with AAMCO called for Robert and Linda Romano to agree “to the jurisdiction and venue of the United States District Court for the Eastern District of Pennsylvania with respect to any proceedings” that arise out of a contract dispute with the parent company.

As the National Law Review reported, AAMCO sued the couple for violating a provision of the franchise agreement and filed the lawsuit in Pennsylvania – where AAMCO is based – in accordance with the forum selection clause, effectively requiring the Romanos to defend the case from several states away.

Watch Out for Arbitration Clauses

In some cases, a legal dispute over a breach of contract will never even get to court. It’s quite common nowadays for contracts to contain an arbitration clause, requiring the matter to be settled by a private arbitrator rather than through a civil trial.

Such clauses typically spell out how the arbitrator will be chosen and limit the rights of the losing party to appeal the arbitrator’s decision.

Legal Help Is Available

The more complicated the business transaction, the more you’ll need the expertise of a well-qualified attorney. At the Law Offices of Larry E. Bray, P.A., we’ll help protect you and your business from future liability by examining the terms of a transaction before you sign it.

We will also continue to work with you to deal with post-transactional issues should they arise after finalizing your transaction. Contact our offices in Lake Worth, West Palm Beach, or Boca Raton to schedule a consultation today.

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