Running a business in Baltimore requires a sharp eye for detail. While you likely focus on pricing and deadlines, the fine print often contains “sleeper” clauses that dictate your company’s future during a dispute.
In Maryland, courts generally follow the objective law of contracts. This means that if the contract language is unambiguous, a judge will enforce the written words… largely regardless of your subjective original intent.
Here are five critical sections you should review before signing your next agreement.
1. Choice of law and venue
Many online templates default to the laws of New York or Delaware. If a dispute arises, you could find yourself traveling out of state to defend your business under unfamiliar rules. Explicitly stating that a contract is governed by the laws of the State of Maryland keeps your legal matters local and manageable.
2. Attorney’s fees provisions
Maryland typically follows the “American Rule,” where each party pays for their own legal representation. Without a “Fee-Shifting” clause, you might spend $20,000 in legal fees just to recover a $10,000 debt. Including this provision allows you to seek recovery of reasonable legal expenses in a successful breach of contract claim.
3. Mutual indemnification
Indemnity is a commitment to pay for losses if a third party sues. Many contracts are one-sided, protecting only the entity that drafted the document. Many business owners seek to negotiate mutual indemnification. This protects your business from being held financially responsible for a partner’s negligence or mistakes.
4. Integration and merger
The “parol evidence rule” often prevents the use of oral statements to contradict a written agreement. An Integration Clause confirms that the written document is the entire agreement. Without it, and barring exceptions like fraud, those prior verbal promises may be completely inadmissible in court.
5. Liquidated damages
Calculating the exact cost of a project delay is difficult. A Liquidated Damages clause sets a fixed, pre-agreed amount for specific breaches. In Maryland, these amounts must be a reasonable estimate of actual damages. This clause provides a clear roadmap for compensation without the need to prove every penny of loss during a trial.
Protecting your bottom line
A well-drafted contract serves as your first line of defense in the Maryland business landscape. Reviewing these often-missed clauses ensures that your agreements reflect your actual intentions and may shield your company from unexpected liabilities.