March 2015

Post image for Revisiting “No Reliance” Language in Contracts

A (fairly) recent 8th Circuit case reminded me of the importance of including “no reliance” language in even simple contracts.

Exploring the idea of drafting simplified contracts for simple situations, I posted a sample contract for a sale of goods a couple of years ago. The idea was to draft a B2B contract that would afford minimum effective legal protection in situations where there’s no special reason to think that the agreement would be litigated. A reader left the following comment and I revised my form agreement in response:

The Disclaimer of Warranty and Entire Agreement clauses are very likely insufficient to negate claims of fraudulent inducement. I would suggest having a clause to address a potential fraudulent inducement claim even under a “minimum effective legal protection” scenario to decrease the buyer’s opportunity to manufacture factual disputes that would preclude a dismissal in seller’s favor. Language acknowledging that the Buyer is entering into the agreement based only on its own inspection of the goods (even if the seller has superior/peculiar knowledge of the goods) and an acknowledgement that Seller has made no representations about the goods may help.

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Advice

I attended a presentation to a room full of business owners the other day. The presenters were professionals who operate in trusted advisor roles. The topic was improving the value of your business by making yourself less indispensable.

An interesting part of the event was a discussion during the Q&A following the presentation. Someone mentioned the frustration of receiving financial statements from a CPA without commentary. What benefit to the business owner is the information without context, without direction, without advice?

If a business hires a CPA to prepare financial statements, and the CPA delivers financial statements, she’s done her job, right? Maybe. Or maybe not. The consensus in the room was that CPAs who do so aren’t doing their whole job, or at a minimum are letting the opportunity for providing additional value–maybe for additional fees–slip away.

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