Today's Veterinary Business

DEC 2018

Today’s Veterinary Business provides information and resources designed to help veterinarians and office management improve the financial performance of their practices, allowing them to increase the level of patient care and client service.

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49 December 2018/January 2019 • TODAYSVETERINARYBUSINESS.COM Leadership LEGAL LINGO Reading the fine print in a business contract is probably not your idea of a good time. You have a busy practice and negotiating contracts is clearly not why you became a veterinarian or hospital administrator. That said, every business owner or manager should have a firm understanding of which contract provisions require careful review. This is important because contracts create significant obligations and liabilities. By Nicole Snyder, JD While every contract is differ- ent, the following five provisions are common in business agree- ments. I will explain the provisions and what you need to avoid. Indemnification Example: You agree to indemnify, defend and hold harmless ABC Corp. from and against any loss, cost, liability or damage (including professional fees) arising out of your breach of the agreement or your negligence or willful misconduct. WHAT DOES IT MEAN? An indemnification provision is a promise by the indemnifying party to be responsible for certain losses of the indemnified party. These losses typically are caused by the indemnifying party's agreement breach and include losses based on claims raised by a third party against the indemnified party. For example, your cleaning ser- vice might require you to sign an indemnification provision stating that if you create a hazardous situ - ation in your hospital that injures one of its workers, then you will be responsible for the damages and injuries incurred by the employee. PITFALLS AND TIPS Indemnification clauses are import- ant and are often heavily negoti- ated and litigated. They are used to address high-risk and high-cost occurrences. If you are indemnify- ing another party, be sure you are indemnifying only for your own negligence or willful misconduct. Indemnification provisions some- times are overbroad, requiring the indemnification of acts by any third party concerning the matter. While protecting the other party from your own wrongdoing might be fair and equitable, it is typically not standard for you to have to protect the other party from damages you do not cause through your breach or other wrongful actions. Confidentiality Example: You agree to keep con- fidential the terms and conditions of this agreement and any infor- mation provided to you or your employees, agents or contractors. You shall not (a) disclose to any third party any terms or conditions of this agreement or any other agreement-related document or (b) provide to any third party an origi- nal or a copy of this agreement. WHAT DOES IT MEAN? A confidentiality provision requires you to not disclose agreement terms or sometimes the existence of the agreement to any third party. This can be important to suppliers that negotiate different terms with customers. The supplier might re- quire that you keep your agreement confidential to protect the supplier's bargaining power at other practices. PITFALLS AND TIPS A confidentiality provision is prob- lematic for at least three reasons: • You might forget that an agreement has a confidential- ity provision. • Informing everyone in your practice who might breach the provision that they must not do so can be difficult. • If you consider the sale or merger of your practice, you likely will be asked to disclose all your business contracts to the other party. You might be liable if the other party to the confidentiality pro- vision incurs damages as a result of your disclosure. Additionally, if telling prospective clients and customers that you are in a busi- ness relationship with the other party is important to your business strategy, then you need to be al- lowed to do so under the terms of the contract. Limitations on Damages Example: You agree that ABC Corp.'s damages for any breach of this agreement shall be limited to the amounts you pay for the ser- vices provided by ABC Corp. WHAT DOES IT MEAN? A damage limitation clause caps the amount you can claim if the other party breaches the agree- ment. As a result, using the ex- ample above, if you've only paid $30,000 for products or services under the agreement, then that is the maximum you may be entitled to, even if the other party does something that causes you to incur $100,000 in damages. 1 3 The devil's in the details Not understanding common contract terms and failing to renegotiate certain provisions when appropriate can cause unnecessary risk and liability. 2 Continued on Page 51

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