Protecting Your Illinois Business

Running a business as all about building and maintaining strong business relationships.

But business owners sometimes fail to give the proper attention to the use of “standard business terms” in their contracts. In fact, often times, “standard business terms” are disparagingly referred to as merely “boiler plate” and not given their proper due. When I hear this, I like to point out that “boiler plate terms” are usually tried and true and serve very important roles. Here are just a few examples of highly recommended “boiler plate” or “standard business terms” I use in my business clients’ contracts and why they are important.

Limitation of Liability and Waiver of Consequential Damages Terms. Both of terms protect the party who is delivering either a service or product from unlimited liability for losses suffered by the other party if there is a failure to deliver or perform. Ask yourself, if you are selling a product or service for a specific amount, do you want to be potentially liable for all of the foreseeable damages suffered by the other party if you fail to deliver or perform? Think of an open-ended financial domino effect for which you are responsible. If you want to avoid unlimited liability, you need to use standard Limitation or Liability and Waiver of Consequential Damages terms in your business contracts.

Choice of Law, Exclusive Venue and Personal Jurisdiction Terms. Unfortunately as part of running a business, sometimes you will have to enforce our rights or defend yourself from claims brought by another party. In those situations, wouldn’t you rather use your local trusted counsel, use your own state’s laws and force the other party to fight you on your home court? Most business owners would say “Of course!” In order to do so, you should consider using standard Choice of Law, Exclusive Venue and Personal Jurisdiction terms in your business contracts.

Attorneys Fees Recovery Term. Whenever a client of mine asks that I file a lawsuit against another party, one of the first things I ask is whether their contract contains an attorneys’ fees recovery term. Why? Because, unless the contract has one or if there is a statute which provides for their recovery, even if I am successful for my client they will still have to pay my attorneys fees and they cannot recover them from the other party as part of the judgment. This reality is often an economic deterrent to many businesses from pursuing their rights. In light of this, I tell my clients that it is important to have an attorney fees recovery provision in their contracts. Aside from the possibility of recovering your attorneys fees as part of the judgment, the use of this type of term will often cause the other side to resolve the matter sooner in light of their additional financial exposure. However, in order to gain these advantages, you need to use a standard Attorneys Fees Recovery term in your business contracts.

Professional corporations, even more than other corps, should have a buy-sell agreement in place.

Aaron, Brad, and Cheryl where friends from dental school, and decided to open a practice together after they graduated. They had heard about partnership agreements during an office-management course they took in school, and called us to help them put one together.

We discussed with them the importance of the corporate shield, and suggests that they form a professional corporation rather than a general partnership. They agreed, and as part of that entered into a shareholder agreement.

Things seemed to be going well until Brad started to have personal problems. Unbeknownst to Aaron and Cheryl, Brad (who was married) started having a relationship with one of his patients. This precipitated Brad’s wife filing for divorce, and the Illinois State Board of Professional Regulation ended up taking his dental license due to what it considered was an unethical relationship with his patient.

Aaron and Cheryl came to us and asked us what, if anything, they needed to do to protect themselves and the business. We reminded him of the shareholder’s agreement, which contained buy-sell provisions requiring each of them to be bought-out by the others if any of them ever lost their dental license. We were able to work with Aaron and Cheryl to buy out Brad’s interest as outlined in the shareholder’s agreement, thus protecting them personally from claims against the company related to any malpractice Brad had committed, as well as protecting the business’ structure as a professional corporation.

If you are a professional doing business with others in your area of practice, give us a call to see if your business structure allows you to shield yourself from corporate liabilities or the missteps of your co-practitioners, and to make sure that your shareholders’ agreement gives you (and the corporation) the proper protection in case anything goes wrong.


If you liked this post, follow us on Facebook and Twitter sign up for our monthly newsletter using the form in the sidebar. And be sure to read the Disclaimer.

Charles Wentworth
Charles Wentworth
Charles Wentworth
Charles is an attorney in Glen Ellyn, Illinois. After graduating from the University of Utah, he clerked for Chief Justice John T. Broderick of the New Hampshire Supreme Court. He then became a litigation associate at Kirkland & Ellis LLP before opening his own office and partnering with Rick Lofgren. He lives just outside of Chicago, where he participates in community activities, including Boy Scouts and little-league baseball.