Business

Common Legal Mistakes Businesses Make And HOW TO PREVENT Them, Part I

Most small and many medium-sized businesses make common errors that could be easily avoided with little cost and just a small amount of effort. However, businesses make the same mistakes again and again. This informative article, which is dependant on Georgia rules, will identify nine common legal mistakes and the steps businesses may take to avoid them. Although this article shall help you identify and understand some key points, be sure to consult with a lawyer from your jurisdiction about the statutory law in your jurisdiction, and also about the particular factual circumstances that influence your business. This article is based on a presentation the writer recently gave to a business.

Mistake No. 1: Failure to follow the leading directive. What’s the prime directive? Mistake No. 2: Failing woefully to Protect Limited Liability. Most business people know that they ought to form a company or a restricted responsibility company (“LLC”) for their business, and know that doing this offers protection for their personal assets. It really is true that the “corporate veil” will protect personal resources from many types of liability (remember, however, to also have a good liability insurance program). However, many business people are not aware that, in certain circumstances, courts will “pierce the corporate veil, ” signifying they will look through the corporate responsibility shell and subject others and shareholders to personal liability.

Mistake No. 3: Not Understanding the results of Sales Talk. Most business people understand a warranty to be always a written executing, either in a agreement or given a product, that says what the maker or seller can do when there is a nagging problem with a product. It is true that such documents are warranties. However, the law goes further.

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Statements your sales people make in the sales process may also create warranties. Lawyers love sales people because sales representatives have helped put a great deal of lawyers’ children through college! Here is how the problem can occur: Sales people are usually trained to think of themselves as consultants. Sales representatives might make recommendations, they may make very specific statements regarding the features of the product, and may even prepare personalized “repay” reviews or other written reviews regarding the benefits of the merchandise for the customer.

Although this process is without a doubt effective in making sales, it can result in unintended express warranties. Under the Uniform Commercial Code (“UCC”), any affirmation of fact regarding the goods that becomes area of the basis for the bargain can create an express warranty. Descriptions and samples of the merchandise that become area of the basis for the bargain can also create express warranties. There is no means of avoiding this risk completely probably.

However, there are some common sense steps that can be taken to lower the chance without reducing sales. First, if a sales person is making a payback analysis or similar record, any claims regarding performance should be referred to as an “estimate” or “illustrative,” and that actual experience may vary. Of course, additionally it is very important to have data and experience burning any estimates!

Mistake No. 4: Not Disclaiming Implied Warranties. The UCC provides for implied warranties that connect with any sale with a product owner. The implied guarantee of merchantability provides, essentially, that goods will be of reasonable and average quality and would move without objection in the trade. The implied warranty of fitness for a particular purpose is necessary when a seller has reason to learn that a buyer is acquiring goods for a particular purpose, and it is relying on the seller’s expertise to furnish suitable goods.

If these circumstances come into play (that they often can, given the inclination of sales people to act as consultants), then there can be an implied warranty that the products are suitable for the purpose. Implied guarantees can create a lot of problems for sellers. Implied warranties come into play only once there’s a dispute. Further, implied warranties are very vaguely described in the UCC.