Expert Mentor Session Part 1: Importance of a Business Contract

Expert Mentor Session Part 1: Importance of a Business Contract

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TRANSCRIPT


[Sunny Smith]: Michael H. Cohen is the founder of Cohen Healthcare Law Group.

He’s a former professor at Harvard medical school and a Harvard T.H. Chan School of Public Health. The author of over a hundred articles in law reviews and peer reviewed journals, as well as six books, including four published by an academic presses like Johns Hopkins University Press. Michael’s a thought leader who pioneers legal strategies and solutions for clients in traditional and emerging health and wellness markets. In doing so, he advises many physician clients in a variety of businesses and practices. Michael and his attorney team have a wide range of knowledge and he’s glad to have this chance to share some of it with us today.

Question:

I’m a physician starting a coaching business and getting a part-time academic job. To protect my business, do i need a contract so my business will not be stymied?

[Michael H. Cohen]: Yeah, you should. I mean, you should definitely have it reviewed.

A couple of overarching points here. First of all, you should have it reviewed, right? Because there will be things in there … I’m going to just tell you a story, a quick story.

So we had a client, this client loved our work and loved what we did, did very well. And they went on to other glories and success. We didn’t hear from them for six years. Six years later, they come back and go,

Michael, did you draft this contract for us?

There’s something wrong with it.

We owe $100,000. How could you have let this happen?

Yeah, I was freaked out.

I said, “Talk about things.” And he’s like, “Oh my God, did we miss something here?”

And so it turns out Appendix J was that they would owe this $100,000 and it was basically like they were being given a loan. In fact, I had not reviewed it. Why? Because we had reviewed up to all the appendices before this contract, but then they just stopped. They just stopped doing legal work.

They were like, “We’re not going to do more legal work.” And I didn’t know it. So after the fact, looking at over … Sorry, that was kind of a long story, but the point is, you should have it reviewed because they didn’t review it. And then it was this 50 page contract. And at the last minute, the other side threw in this Appendix J, which basically said you owe us $100,000. They just slipped it in and they thought, “We’re not going to spend another, whatever, a couple hundred dollars for the legal review.” Like, “We’re done.”

And six years later, they discovered that they owed $100,000 and there’s nothing that could be done about it because they signed the contract. So it’s just a way of saying once you sign, you sign, you can’t do anything about it. So you should have it reviewed now.

Definitely, the things that come up with the university often that people don’t expect is ownership of, not just the not-compete, but the ownership of intellectual property. Because a lot of times they’ll say that we own everything you design, whether you invent that rocket ship on the job, or you do it at home, or you had a dream about the rocket ship and reduced it to paper outside, it’s just, I’ve seen very, very inclusive proprietary inventions contracts. And you have to decide if you can live with that.

The other thing I want to say is that you’re dealing with a very big fish. And so you probably don’t have a lot of bargaining power. So you should have it reviewed, you should have it reviewed for the intellectual property piece and you might not have a lot of power to change things. And then you have to decide, is this something I can live with?

If it’s great and you want it, then you live with it. But then you also, like the guy with Appendix J, you live with the consequences. And I want to make one more point, which is that being a lawyer is about a bunch of things. I talked about issue spotting, but there’s a difference between the legal points and the business points. The legal points, they’re like business points, but they protect you in a very refined way. So for example, the non-compete, it’s a lawyer point.

A lawyer is going to look at the language and you’re going to say, “This is too restrictive or not.” But the business point is going to be, how much do you get paid?

When do you have to work?

Some of those big constraints. And so what you want to do is you’re not going to win everything, but you want to identify the major, major things that are going to affect you on a business level. So obviously if they own all of your intellectual property and you can’t start a new business, that’s a big business point for you, right? It’s a legal point, but it’s a business deal breaker.

So that’s stuff you need to know.

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