minimum effective legal protection

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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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I’ve often had clients ask me to keep their contracts short and simple. That’s a great goal, especially since two of the purposes of a written contract involve informing the parties about their business relationship. The less accessible a contract is to the people who need to read it, the less helpful it’ll be.

Another purpose of a written contract, though, involves ensuring that your rights are as secure as possible if you have to fight for them. That means being clear about what your rights are, providing for effective remedies if you find yourself in a legal battle, and making sure that you’re made whole after the dust settles. It also means that dotting every i and crossing every t will be especially important.

The purpose or purposes that predominate in a particular business deal will affect how complex the written contract that memorializes the deal should be. Let me suggest a framework for thinking about how to ensure the appropriate level of legal protection.

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