Three Must-Haves to Avoid Contractual Kryptonite

Sep 16, 2022 | Business Law

Faster than a speeding bullet, more powerful than a locomotive, and able to leap tall buildings in a single bound, Superman is the OG superhero. Worth over $10B across film, television, merchandise, brand partnerships, and comic book sales, Clark Kent’s alter ego spawned the Golden Age of Comics and launched the modern superhero film industry.

The Man of Steel’s only weakness was the fictional kryptonite (and, okay, maybe Lois Lane), but creators Jerry Siegel and Joe Shuster faced their own real-life kryptonite: contract law.

Siegel and Shuster came up with Superman at age 19 and spent the next five years trying to sell the idea as a syndicated newspaper comic strip. After years of no success, in 1938, the friends sold their first Superman story to DC Comics for $130.

And even though Superman has since become an integral part of U.S. culture, Siegel and Shuster never saw their fair share of the profits. Ambiguous contract language surrounding copyright ownership, right of refusal, and royalty rights meant that ownership of the Metropolis Marvel (and other characters in the Superman universe) was tied up in legal actions for nearly 70 years.

While the stakes may not be as high for most businesses as for Siegel and Shuster, bad contracts and soured business relationships are as common as kids in Superman costumes on Halloween. And legal contracts are kryptonite for any business owner. They can lock you into unfair or unreasonable terms, reduce your right of action if there is a breach, increase your risk of a lawsuit, and result in lost revenue.

Whether you’re a small business hoping for a new partnership, working on a real estate deal, hiring a vendor, or hiring an employee, there are three things you must do to avoid contractual kryptonite:

  1. Use clear and simple language
  2. Go into detail about expectations and obligations
  3. Get everything in writing

Tip 1: Make Your Contract’s Language Clear and Simple

It’s normal for business contracts to be long and extremely dense. But legal language doesn’t necessarily have to be jargony. 

Having a good business contract is like having detailed rules for your favorite board game. When done right, everyone understands who gets to roll the dice and when. But having a contract full of legalese? It’s like having those same rules in a language you don’t speak—it makes it hard for everyone to play the right way.

Using clear and simple language, if it’s done well by someone experienced in business law, strengthens your contract by ensuring everyone fully understands their rights and obligations.

In Texas, all signing parties must be capable of entering into the contract. There is no age limit for signing a contract in Texas, but individuals who were minors at the time of signing can void the contract at any time. This also means that contracts signed by persons with reduced capacity due to intellectual disabilities or being under the influence may not be binding.

In addition to the capacity requirements, there are three elements of a contract that must be present for the contract to be enforceable: an offer, acceptance of the offer, and mutual consideration.

Offer

An enforceable contract has an offer that clearly communicates:

  • Who is involved and what their roles are
  • What the contract is for (i.e., employment contract, vendor agreement, M&A concerns)
  • Expected terms and conditions

Because offers with unfair terms are enforceable, getting a business lawyer involved at these early stages may save you time and money in the long run. And we shouldn’t have to say this, but contracts are only valid if they apply to legal activities. (A contract concerning the illegal sale of contraband isn’t enforceable. Or a good idea. Seriously. Don’t document your misdeeds, people. Especially on video and post them on the internet. But that is a tale for another post…)

Acceptance

Once an offer is issued, the receiving party can either accept the offer or make a counteroffer. Either way, the contract is not valid until both parties demonstrate unconditional acceptance of all terms and conditions.

Consideration

Consideration refers to the value exchanged between parties. This often refers to actual money, but it can also refer to client lists, equipment, ownership stake, inventory, goodwill, intellectual property, or other items. 

Tip 2: Go Into Detail About Expectations and Obligations

While Siegel and Shuster lost their first attempt to regain partial ownership of the Superman property, their contract did help them in two ways.

First, their contract gave their publisher first right of refusal for any stories or characters they created between 1938 and 1943 as long as the publisher responded within six weeks. Shortly after signing the contract, Siegel pitched a series called Superboy based on Superman’s adolescence. It was rejected, but he pitched it again in 1940. The publisher never responded. But in 1944, while Siegel was stationed in Hawaii with the U.S. Army, they published a Superboy story. Additionally, both men were supposed to receive 5% of the net proceeds from all commercial licensing agreements outside of publishing deals. 

While their contract was deficient in protecting their stake in Superman himself, those two clauses saved them from being cut out of the Superman money machine forever.

A good contract will include nitty-gritty details about everything, including but not limited to:

  • Timelines and deadlines 
  • Financial obligations
  • Performance expectations
  • Payment schedules
  • Reasonable Non-compete requirements (when available)
  • Ownership privileges
  • Rights and remediation available if the contract is breached
  • Framework for terminating the agreement

Engaging legal services to draft and review these details can help you avoid loopholes and ambiguities that often turn a contract into a curse.

Tip 3: Get Everything in Writing

Most people know that using a contract template from the internet or just a handshake is just asking for trouble. While oral agreements can be enforceable, it’s much easier and less expensive to enforce the terms of a written contract. 

Additionally, writing everything down helps you work through the details of what you want, need, and expect for the contract to be successful. And having clear expectations from the outset makes it much more likely that everyone involved will achieve their objectives.

Need Help Preparing Your Texas Business Contract?

You don’t have to use a business lawyer for a contract to be legally binding, but at the very least, any contract you sign should be reviewed by an attorney.

The attorneys at Shann M. Chaudhry, Esq. have extensive experience drafting, reviewing, and enforcing contracts for businesses of all sizes in Texas. We believe in putting people first and we pride ourselves on providing empathetic, effective legal services to all our clients.

If you need help preparing a contract for your business, contact us today to book a consultation.

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