BUSINESS, EMPLOYMENT, PRENUPTIAL AND LABOR CONTRACT LAWYERS IN SAN DIEGO
Your contracts are the foundation—the concrete—on which you build your business.
A poorly drafted contract may save you a few dollars upfront, but it can cost you hundreds of thousands in litigation down the road.
We see this all the time.
If you need real protection, let us craft a custom-made contract that fits your business like a tailored suit.
Call us now at (619) 793-4827 or visit our offices for a free consultation—we even validate your parking.
We are conveniently located in UTC, across from the La Jolla Marriott, off La Jolla Village Drive, at:
4225 Executive Square, 6th Floor, La Jolla, CA 92037.
We handle California and San Diego contracts in the following areas:
- Employment and severance agreements
- Startups and venture capital (VC)/angel investor funding
- Leases, investments, real estate, and business transactions
- Noncompete and nondisclosure agreements
- Releases
- Employment and termination contracts
- Prenuptial and postnuptial agreements
- Hiring of senior personnel
- Partnership and limited liability company (LLC) operating agreements
- Purchase and sale of a business or real estate
Our law firm receives calls almost daily about contract issues. To help you better understand this complex yet essential area of law, we created this page.
Contracts have, unfortunately, taken a back seat to the internet, where many believe that one-size-fits-all templates are sufficient. These individuals often become our best clients—because when something goes wrong, they urgently need a solution. At that point, cost is no longer the concern—they just hope to turn back the clock on a bad contract.
Unfortunately, that is not always possible. Just this month, a client came to us with a self-modified contract, and they had not worked with a skilled contract lawyer (despite likely being told otherwise). The result? A legal mess that could lead to a loss of over $100 million.
Definition Of A Custom Contract
First, let’s clarify the difference between a standard contract and a custom contract.
A standard contract is exactly what it sounds like—a pre-written document with generic clauses that can be obtained from software or legal books. It is essentially a one-size-fits-all contract. In some cases, standard contracts are sufficient, such as for promissory notes, corporate bylaws, or simple transactions. We completely agree that if a standard contract meets your needs, you shouldn’t waste money on customization.
A custom contract, on the other hand, is a much more sophisticated legal document that requires significantly more time and effort to prepare. However, in the long run, it is far more cost-effective. It’s cheaper to have all necessary clauses included upfront than to spend $150,000 on litigation later to fix an issue that could have been addressed in the contract. (By the way, research shows that the average cost of litigating a case in San Diego County is $150,000.)
The key to a custom contract is anticipating potential risks in advance and drafting clauses that proactively protect you. It is a highly creative process that requires extensive time and strategic thinking. By the time the contract is complete, the lawyer may be exhausted, but the client is well-protected and, most importantly, happy—and that’s what truly matters.
Examples Of How A Contract Works
We are going to include contract samples to help you understand the structure of a contract and better assess what is needed in your own agreements. We’ll start with the basics, then move on to specific industries and explore more specialized topics.
Standard Contract Clauses
All contracts should contain certain standard clauses. Many people come to us during a free consultation and ask if we can draft a one-page contract. Some want this to save money, while others fear that a longer contract might intimidate the other party and cause them to walk away from the deal.
Let’s address the second concern first. If you are doing business with someone who walks away just because you have a well-structured contract, then you should seriously reconsider whether you should be doing business with them at all.
For example, imagine your contract includes a liquidated damages clause stating that if the other party discloses your trade secret, they must pay $1 million. If they refuse to sign, shouldn’t that raise a red flag? If they have no intention of revealing your secret, why would they hesitate to agree to the terms? Too many people fear losing a deal over a contract, but in reality, negotiation often strengthens relationships. In fact, many successful business relationships form through contract negotiations, as they create a bonding experience between the parties.
Now, let’s address the first issue—there is no such thing as a one-page contract. A proper contract requires more than one page just to cover the necessary standard clauses. While these clauses may seem insignificant or make the contract longer, they are critical in ensuring your protection and clarifying the terms of the agreement.
Arbitration Clause
Litigation is expensive, time-consuming, and slow, as the courts are overworked. To address this, many contracts now include arbitration clauses, which allow disputes to be resolved faster and at a lower cost.
While arbitration may not always result in multi-million-dollar punitive damages, there is never a guarantee that you will win such damages in court either. However, the key is to carefully evaluate the type of contract before deciding whether to include an arbitration clause.
In some cases, you may want to avoid arbitration altogether. For example, in a non-disclosure agreement (NDA), you may prefer litigation to pursue major damages and take advantage of all legal tools available in court.
Sometimes, we draft hybrid contracts that allow for injunctions (court-ordered actions or restrictions) but require arbitration for other disputes. This ensures flexibility, balancing the efficiency of arbitration with the legal power of litigation when necessary.
Severability Clause
This clause ensures that if any part of the contract is deemed void or unenforceable, the rest of the contract remains valid. We take it a step further by specifying that if any individual sentence is void, it should simply be ignored or stricken, preventing it from affecting the validity of the remaining agreement.
This provision is particularly useful for contracts spanning multiple jurisdictions, as different states may have varying legal standards. If the opposing party argues for a change in jurisdiction, what is valid in California may not necessarily be valid elsewhere. This clause helps protect your contract from such challenges.
We could elaborate further, but the key takeaway is that a one-page contract is simply not feasible—especially when essential clauses like these take up more than a page.
And no, we do not charge extra for these clauses—they take mere seconds to copy and paste, but their value is immeasurable in ensuring a strong and enforceable contract.
Venue And Jurisdiction Clause
This clause determines where disputes will be resolved, whether in court or arbitration.
You generally want to make venue and jurisdiction as convenient for yourself as possible. Ideally, you should have disputes handled in your own jurisdiction, so you don’t have to travel every time the opposing party’s lawyer files a motion or subpoenas you. Keeping the case close to home can save you significant time and costs.
However, some jurisdictions are more favorable to certain legal issues. Depending on what is most valuable to you in terms of potential risks, it may actually be strategic to select a distant jurisdiction if it provides a legal advantage.
Patent Research Contract
We recently reviewed a high-stakes contract in this area. Our clients were conducting research in the lab of a strategic alliance (let’s call them SA) while working on a specific formula.
Unfortunately, they had already signed a contract that granted SA ownership of any patentable formula they discovered or improved—not just within the lab, but also outside of it, now and in the future.
This is a prime example of where a custom contract could have saved $100 million. Had the contract been properly drafted, it could have restricted SA’s rights to only the specific formula being developed—and nothing more.
Employment Law And Hiring And Firing Contract
This is a complex and often overlooked area of contract law, and many clients find themselves in trouble because they take too much for granted.
If you hire a new employee, you should have a clear, well-drafted contract in place. Protecting trade secrets is just one example—if you do not put it in writing, you have no legal protection.
Now, consider what can go wrong:
- An ex-employee is required to return their files and company-issued computer—but what if they made backups? If your contract doesn’t explicitly prohibit this, you are at risk.
- A business owner who didn’t believe in lawyers once told us that his former employee left his firm, took the entire client mailing list, and started a competing business. He refused to hire a lawyer and dismissed the need for a contract. Two years later, it happened again with another employee. Even then, he still thought it wouldn’t happen a third time—so he once again refused to draft a contract. Had he implemented a non-compete and confidentiality clause, he could have prevented this.
- In another situation, an employee quit, started a competing business, and poached the entire staff from their former employer. A custom contract tailored to the business could have prevented this by including non-solicitation and non-compete clauses.
A well-drafted employment contract is essential to protect your business from these risks. Failing to have one leaves you vulnerable—and by the time a dispute arises, it may already be too late.
Lease Contract
We could write pages on leases, but one of the most critical clauses to watch out for is the personal guarantee requirement—especially when signing a lease under a corporation or LLC.
Many landlords insist that you personally guarantee the lease, even though your business entity is the tenant. Some leases go even further, requiring your spouse to personally guarantee the lease as well. This is where a custom contract clause can protect you by negotiating more favorable terms.
In one case, before we were hired, a client spent nearly 10 months with two different law firms trying to remove a clause that forced his wife to guarantee a seven-figure lease. We got it removed in just three days.
Another critical lease clause to examine is what happens if the landlord sells the building. We reviewed a particularly tricky lease where, after carefully analyzing multiple clauses together, it became clear that:
- The lessee had made significant investments in improvements and repairs to the property.
- The landlord could sell the building at any time.
- The new landlord would not be obligated to honor the existing lease.
This is where even though you are not drafting the lease, you can insist on inserting a protective clause to counteract unfair terms. A custom lease clause can prevent serious financial and legal consequences down the road.
Purchase And Sale Of A Business Contract
These are contracts you should approach with extreme caution. The purchase of a business is a high-risk transaction, and hidden issues may not become apparent until much later.
Potential risks include:
- Inaccurate financial records – Errors in the books may only surface after the transaction is complete.
- Training agreements – The seller may agree to stay and train you, but fail to follow through.
- Competing businesses – The seller could start a competing business unless the contract includes clear non-compete provisions specifying what is allowed and under what conditions.
- Employee retention – What happens to the staff? Are they obligated to stay? Did they sign non-compete or non-solicitation agreements?
- Client ownership – Who owns the client list? Can the seller keep a copy?
A well-drafted, customized contract is essential to protect your investment and avoid costly surprises.
CONCLUSION
As you’ve seen, this area of law is both fascinating and filled with potential pitfalls. One-size-fits-all contracts may seem like a cost-saving solution, but they often turn into the most expensive money you never planned to spend.
However, contract law can be an exciting and strategic process. If you’re passionate about your business, you might enjoy working closely with your lawyer, discussing your unique concerns, and transforming them into custom contract clauses tailored specifically for you.
The good news? Once you have a well-drafted contract—whether it’s for nondisclosure agreements, hiring and firing, or other business matters—you can typically reuse it unless there is a major change in the law. A strong contract will pay for itself many times over.
We ask just one favor: Don’t view contracts as a necessary evil to get over with quickly. Instead, see them as a valuable investment—one that deserves respect and careful attention.
Call us at (800) 637-6178 to speak with a San Diego contract lawyer today.