What is the real purpose of contracts? Anyone can shake hands to make a deal, so why write it down?
Because a contract explains the rules of what happens when an agreement doesn’t go as planned.
That “boilerplate” language that everyone glosses over, all of sudden becomes your “guidebook” as to how to proceed. Does it allow for pre-judgment remedies? What legal jurisdiction governs? Can you arbitrate? If so, where and how much will it cost?
These are critical questions that you don’t want to have to address after something has gone wrong with your deal.
One of the most common issues that can lead to complications in a “cut & paste” agreement is the choice of forum to resolve a dispute. Is it court, is it arbitration, or something else entirely? If it’s arbitration, who pays for it? How many judges are involved? How are they selected?
In a legal dispute, a bloated and thoughtless “Copy & Paste” job can be more costly than the dispute itself when it comes to contracts.
All too often, attorneys and legal advisors will simply lift text from a sample contract or prior deal and paste it into your new agreements without thinking about the ramifications, costs, and time it may cost you later.
This is a disservice to you as the client.
The major issue that arises is that when “Copy & Paste” such as these are used to outline the conditions of an agreement, parts may be irrelevant or even counter to the goals of the agreement. Thus, from your perspective, not worth the paper they are written on.
Filing can be very expensive, time-consuming, and if unsuccessful or mismanaged, can lead to an unnecessary defeat or meager returns of pennies to the dollar.
Now, there is a new, effective alternative – legally binding online arbitration. The Civil Courts have experienced a 30 percent increase in pending cases over and above the already lengthy list, so arbitration can be a solution.
When entering into a loan contract, you should always make sure that your legal advisor has included an arbitration clause. It’s one of the smartest things you can do to protect your loan or contract, offering a swift and cost-effective six-step solution if the borrower defaults on the loan.
If in doubt, you can click the link and check out Brief’s sample arbitration clause.
So how do I vet loan contracts?
The litmus test as to whether a contract is a good one is quite straightforward and simple… Can you actually understand it? The purpose of any loan contract is to establish a set of parameters of how and when the sum needs to be paid back and what happens if the debtor defaults on payment.
It is meant to be clear, concise, relevant and to the point. This applies to your arbitration clause and the process it sets forth.
Unfortunately, some members of the legal profession can over-complicate contracts and even carry over contract templates that are not thoughtful or relevant to your agreement.
Why you should distrust a badly written dispute clause?
Imagine if you have a $50,000 loan, documented by a loan agreement that calls for an in-person, full-blown arbitration before a 3 judge panel. It doesn’t make economic sense to have multiple hearings, in person, paying three judges to decide your $50,000 claim.
Each judge, billing at least $500 an hour, alone does not justify the cost.
Bloated contracts are more expensive to litigate and may not provide the resolution process that provides relative value. Now imagine the same loan, but arbitrated all online and asynchronously with Brief.
It can be resolved in a matter of 45 days or less, with one of their qualified Ejudges, starting at $600. If you prevail, the arbitration award can be reduced to an enforceable judgment in the district court.
What should loan contracts look like?
Do not confuse clear and concise for overly simple. Well-written contracts will be detailed, to the point and yet readable and relatively easy to understand at the same time. Remember, a loan contract is between the lender and the borrower and not for their attorneys. Both parties should be able to understand the language used.
As a loan contract, the borrower and the lender should be clearly defined along with the type of loan, the loan amount, and the timeframe to pay back the loan.
A repayment schedule should also be specified. Is it going to be a monthly payment or a weekly one? Have you specified the interest rate against the amount of money loaned?
Are you ready to recover what you are owed?
Brief has helped small and large businesses across the United States recover debts that were simply not worth the cost of traditional litigation or arbitration if not for online dispute resolution.
Register now on our online portal. If a dispute arises, it is a simple process to submit your claim, all for a flat upfront fee.
Brief’s online arbitration platform is typically 80 percent faster (or more) than a civil court hearing or traditional “brick and mortar” arbitration.
Satisfied and repeat participants include electronic commerce sites (Fintech), factors, banks, MCAs, and other lenders.
Brief also handles all types of monetary disputes and declaratory relief actions such as quiet title, coverage claims and warranty claims.
Our screened network of “Ejudges” spreads across all 50 states, and each case is matched to the jurisdiction and subject matter expertise of the Ejudge.
Brief is a market-leading online arbitration platform in the United States. Our 100 percent online alternative dispute resolution platform helps businesses protect their contracts and agreements through online arbitration. Follow us on LinkedIn or Facebook for updates and news about online arbitration and more.
*Brief cannot and will not give legal advice on any matters, financial or not.