Should College Students Have Powers of Attorneys and Health Care Directives?

What if you have to step in?

This is a commonly overlooked item in estate planning. Most people think about taking care of their children financially, but almost never think about if something bad happens to their adult child. If you have a child or children over 18, if you are not named as their power of attorney or as a decision maker in health care directives you may be blocked in assisting your child in their medical, education and legal issues.

You may not have the rights you think you do.

People assume they have more rights to their student’s information than they really possess. Even though your student is on your health insurance plan and you pay all of his or her medical bills, that does not entitle you to make medical decisions for them in case of an emergency or to get full details of their health crisis or injuries. You are probably not entitled to any information about their medical records – even for such things as a claim dispute. If you pay all of the costs of a child’s college expenses, that does not entitle you to see their grades or discuss their education with a counselor. If your child is out of the country or just a long distance away, you probably cannot act in their behalf.

What documents should you have?

Without these documents, you may not step in when your child needs you most. Se encourage your child to get the following documents before heading off to school:

  • Durable Power of Attorney: The Durable Power of Attorney will allow your child to authorize you to manage his or her financial affairs either immediately or in the future should he become mentally or physically unable to do so. This would authorize you to handle tasks such as paying bills, applying for social security or government benefits and opening and closing accounts.
  • Medical Power of Attorney: The Medical Power of Attorney allows your child to authorize you to make medical decisions if he or she is incapacitated and unable to do so. An agent acting under a Medical Power of Attorney may see the principal’s medical records to make informed medical decisions on his or her behalf.
  • HIPAA Release: HIPAA (the Health Insurance Portability and Accountability Act of 1996) requires health care providers and insurance companies to protect the privacy of patient’s health care information. Those who violate HIPAA are subject to civil and criminal penalties, including jail time, which makes them reluctant to share protected health information without an authorization.
  • FERPA Release: You also might want a FERPA release, which allows your child to get access to educational records.

What do you say to your now, Adult, child?

You child is transitioning into adulthood and therefore may be reluctant to provide what they perceive as continued authority. They are adults and treat them that way. Talk to them like an adult and explain what might happen if they have a medical emergency or need you to help with financial matters. Tell them they can revoke these documents. Lastly, discuss with them how and why such documents will be used.

Putting these documents in place can be one of the best things you can do for your child. It does not have to be expensive, but it must be done correctly.

So You Just Want a Boiler Plate Contract?

Asking a lawyer to prepare a “boilerplate” contract is like fingers scratching the chalkboard. Lawyers hate this because it devalues their services. Clients only think they love them.

Why are you asking for that?

For some reason (actually I know the reason) lately I am being asked by clients to prepare a “boilerplate” contract for them. Why? Well I suspect the obvious – that they are looking to save money or control their costs. I suggest that working with your lawyer to avoid run away hourly fees is often a good thing, but doing that in exchange for a cookie cutter contract is short sighted.

What is boilerplate anyway?

Boilerplate clauses are contract provisions that do not bear any direct relationship to the subject matter of the contract. That is they do not speak to any specific needs of the parties to the transaction or their business goals. In theory these clauses could appear in any contract and not affect the terms of the transaction. They mostly affect the respective rights of the parties to the contract during the life of the contract and often afterward, particularly if there is a breach of the contract.

The basic idea is to use terms familiar to attorneys so that drafting the contract can take less time.

So What’s The Problem with Boilerplate?

Where should I start? First, as stated above, the boiler plate clauses mostly address legal rights not transactional one. In any contract you must make sure that the terms of your deal are being completely and fully addressed. No boilerplate contract is going to do that for you. Second, because they become so commonly used, boilerplate clauses are often overlooked and not scrutinized to make sure they apply to the particular deal or how you actually are doing business with the other side. Rest assured, if there is a problem, everyone is going to be looking at the boilerplate to determine their rights. That is a terrible time to find out mistakes were made or important points overlooked.

Sometimes the error can be as simple as a “cut and paste” error which results in mistaken names or irrelevant clauses. Other times, the error can be substantial and result in increased litigation over what the “boilerplate” even means! So much for standard language. These types of clauses really should only be used as a starting point to make sure that important issues are raised. Then the particulars have to be focused on.

If you have been lucky enough to avoid litigation over the terms of a contract, you are very fortunate. Most contract litigation involves just that – a dispute over the terms of the contract and whether they can avoid a breach, minimize damages or provide other remedies. It is an expensive way to find out what your “standard” contract really means.

Oh, and by the way, understand that in a hard case, the court may overlook or reinterpret the terms of your contract to fashion a relief for the party it feels should prevail. The more “boilerplate” your language looks, the more chance a court may find its own way to interpret it to find justice. Believe me, it happens.

So What are Some Boilerplate Clauses and What do they Mean?

Even with the potential problems it is good to know what some boilerplate clauses are, what they address and some potential concerns:

  • Costs and attorneys’ fees. In the event of a legal dispute, the party that loses must pay the prevailing party’s legal fees. Often clients think that this will result in an automatic award of fees if you win. Problem is that any particular judge or court has their own view of what “prevailing” means in the event of any less than a full victory or what it should have taken to obtain that.
  • Arbitration. Any disputes about the contract must be resolved through arbitration proceedings, not in a lawsuit. The common wisdom is that you can save legal fees through arbitration. This may be true, but arbitration is not necessarily inexpensive or likily to reach the right type of result. You need to consider the type of transaction you have.
  • Choice of law. In the event of a dispute, which State’s law will apply to your lawsuit. In a case with all parties in the same State this may not be an issue. The second an out of state party is involved this clause needs attention because states have different laws on contracts.
  • Jurisdiction. How would you like to fight a lawsuit in a different county or worse, in a different State. It can happen if this clause is overlooked.
  • Waiver. Sometimes a party gives the other party a break during the life of the contract. That party does not want this to become a permanent part of the contract. This clauses allows such temporary deviations.
  • Severability. If a court finds that one of your clauses is invalid, this clause will save the rest of the contract from being declared invalid. Otherwise the baby goes out with the bathwater…so to speak.
  • Integration. This clause prevents a party from claiming that there were other terms that you agreed to that were not in the written contract. It also usually provides that any changes have to be in writing. This is a good think unless you anticipate that you will be making may oral changes as you transact your business.
  • Notice. This is often overlooked or not specific enough. When the time comes to give the other party notice of a problem with the contract, you need to know how this can be done properly or risk the other side claiming that you failed to give prior notice. It also had to take into account that future notice locations may change.
  • Assignment. The last thing you want to find out is that the other party has transferred their rights under your contract to another party that you never dealt with.
  • force majeure (pronounced fors- mazhoor’; also referred to as “Acts of God”). This clause establishes that the agreement will be suspended in the event of unforeseen disasters (such as earthquakes, hurricanes, floods, and so on).
  • Headings. This is a silly clause that says that the headings of each paragraph are not to be given any meaning. No doubt, somewhere, litigation turned on this issue.
  • Jury trial waivers. The expense and time of a jury trial is huge. Most if not all commercial contracts contain this clause.
  • Limitations on damages. This is sometimes considered boilerplate, but experience shows that this will be a heavily negotiated clause if it inserted. No one really wants to leave any money on the table in the event of a dispute.
  • Warranties. If anyone thinks warranties are boilerplate, they are sorely mistaken. This is where a dispute is going to arise in many conflicts.
  • Indemnity. These clauses, too, are not boilerplate. This amounts to a potential guaranty of paying for certain costs in a dispute. Often insurance coverage concerns are relevant, but there is tremendous exposure here for the business owner
  • Applicable Law: Even if you end up litigating in a different jurisdiction, you may want your local law to apply. This clause will allow that.

So What is the Value of Boilerplate Clauses to You?

No question, the use of boilerplate clauses can reduce the drafting time of a contract. For any agreement that involves any significance to your business, thinking that you can use a boilerplate contract runs a tremendous risk that your contract may work against you in a big way. For most transactions other than the simplest ones, it will benefit you to understand what such clauses are for and what they address. Your contracts, however, should be constructed for you or your business specifically.

Legal Forms on the Web – Do you really need an attorney?

A weak maybe? There are, no doubt, situations where a simple form obtained free or at minimal cost on the web will suit your purposes. Caution is the watchword here. While there are many legal forms available on line, you have no assurance about the quality of these documents. They are often created to cover every conceivable situation and as a result, instead of being complete, leave many important issues unaddressed which can and, often do, come back to haunt you.

Having said that, reviewing these on line forms can save you money when you do meet with an attorney. If your situation calls for something other than a simple straightforward matter, maybe these simple forms will be sufficient. Before you use such a form, however, spend a little time considering any legal implications and potential liabilities if the form is inadequate. If you are thinking that you probably need to have an attorney review the documents, then you should be listening to your inner voice. The money you are saving now could be very costly

Saving Legal Fees with on line forms Using online forms can actually be a good way to reduce your legal fees when you do consult an attorney.

  • A good way to use on line forms is to use them to focus your attention on the issues that you should be discussing with the attorney. That way, you can give the attorney direction about what you want to accomplish.
  • Using an on line form can help you also think about answers to questions that the attorney might have which will result in an more efficient (and less costly) meeting.
  • If you have an outline or form that you think is appropriate and the attorney confirms that it is the correct form for your particular situation, you won’t have to pay the attorney to draft the agreement from whole cloth.

Do You Change Your Draw or Salary?

An article in the NY Times business section today poses an interesting cash flow question for small business.

Even if you are not having a collection problem there are times, especially in these times, that your cash flow will ebb and flow without reason. That can have a substantial impact on your sales targets and working capital.

At the same time, as the owner, you have probably set a salary or draw level based upon your revenue projections. If your sales are cyclical, this is also an issue about balancing what you are taking out of the business at any time as well.

The challenge is how to determine whether to continue to take that salary or draw when your business is experiencing the collection downward trends? This of course that you are monitoring your cash flows on a regular basis. Keeping an eye on accounts receivable and accounts payable is clearly something every business should be doing no matter how small.

The answer is probably different for everyone and there may not be a good answer at any particular time. Much of the answer may depend on whether you have confidence in your sales pipeline and can comfortably predict that cash flow will resume. This should require an analysis or projection by you of whether your orders are still coming in, whether you are still being asked for quotes or other indicia that your business is on track.

On the negative side, you may be experiencing issues that might reflect a different future for your business. You will have to address those issues right away.

Part of owning a small business is taking steps to navigate your financial ups and downs. Often, a variable that you can control is how much money you are taking out of the business at any given time. It would be an interesting discussion or thought process that many have probably already gone through

What About the Taxes on the Real Small Business Owners

Most small business owners do business as Sub S corporations or other pass through entities. Changing the corporate tax rate will not help them.

I know that most of my clients and business acquaintances do business in a form that passes net income through to their personal 1040’s where the tax is paid. But most of the political chatter we hear, view or read keeping talking about reducing corporate taxes. That will probably not have a significant effect on the small businesses whose tax structure is based upon their individual tax bracket. The two candidates position on this issues was recently raised in an AP article in the Washington Post http://wapo.st/JEeAq5. The article provides a quick analysis on the relative positions of Romney and Obama and how they will affect the actual taxes on small business owners with pass through income. The article concludes that under both candidates proposals, the big boys in C corps will get the biggest benefit.

It is pretty clear that despite the lip service, neither candidate is addressing the individual tax issues related to small business income. We all need to be alert, no matter what the election result, to review our business structure in the event of any tax changes. Assuming, of course, that Congress can ever agree on any.

10 Questions to Ask Before Family and Friends Become Business Partners | Entrepreneur.com

If there was a single piece of advice that I might give to clients who are considering going into business with friends or family it would be to seek out every other possibility. As an attorney who has spent a great deal of time in litigation unraveling the horrible consequences when these relationships fail. I cringe whenever potential clients think about doing this.

This excellent article poses a series of questions that, at a minimum, people should discuss with potential family or business partners BEFORE entering into the business relationships 10 Questions to Ask Before Family and Friends Become Business Partners | Entrepreneur.com.

The questions suggested by the article are challenging and sometimes difficult to raise, but their beauty lies in raising questions about the expectation of both sides. The excitement of a new small business and potential to make money with people you trust and maybe love can be overwhelming. As a result, decisions to go into business together are often made for the wrong reasons. Or, even worse, the reasons for going into the relationship are not the same for both parties.

When the stress of actually doing business enter the picture, and they will, the basis for the relationship is directly challenged. If the expectations were unspoken or misunderstood at the beginning, they will come out when things get hard. At that point, because of financial and relationship issues, things are going to go bad. And the shame is if this happens, the business is at risk and the relationship may lost forever.

So, as a final thought, look outside your friends and family if you can. If you cannot find someone else you can trust, treat the relationship as if you were entering into a relationship with an outsider. That perspective may save your business and your relationship someday.

Collecting your money – 5 Steps that can help cash flow

As a small business owner, collecting the money you are owed can be critical. In trying financial times like these, every dollar is important to maintaining your own credit and staying profitable. Because other businesses are also experiencing cash flow problems in this economy, many are managing by taking longer to pay their bills while they wait for their own income.

The consequences of even a few customers not paying can be dramatic for small business owners. You can take several steps at the beginning of a relationship with the customer that will increase the odds of being paid. Here are 5 steps that can help.

Step 1
At the beginning of any relationship with a new customer, you have the best opportunity to protect yourself. Before you offer any customer credit, it is a good idea to get a credit report done. If the customer will not consent (in writing, by the way) to your doing this then we suggest you make them a cash basis customer. While there may be some expense to you to get a report it is likely to be cheaper than extending credit that you never are paid back. If they balk or refuse – “cash only” is the only way to go.

Step 2
Make sure your forms provide protection for you in the event of nonpayment. Before you send out your first invoice you should have a completely filled out vendor form that provides you with details about the customer and most important – financial information including where they bank. A continuing personal guaranty for any corporate debt should be required as well. Your form should also make provisions for late charges and my favorite – attorney’s fees.

Step 3
Make a decision about when you will drop a customer if they are not paying. You should be tracking how many days late payments are. Your QuickBooks can age your receivables for you. When clients get to 30 days, contact them and talk about what is going on. If you think that the delay in paying is a temporary condition you probably want to continue to work with the customer, but keep them on a short leash. If you are sensing that the customer might be in a serious financial problem you have to consider making the difficult decision to cut them off. Communication is obviously important. When you make decisions about allowing the customer more time to pay, keep in mind that this decision will affect your profit margin not just your cash flow.

Step 4
“The check is in the mail” is a cliche that we all know to be meaningless. When confronted with this meet it head-on with an offer to accept a credit card payment or PayPal. You may also consider telling the client that you will send someone to pick up the check or cash.

Step 5
When in doubt…discount. While no one likes to reward clients for not paying, but sometimes having fewer dollars in your hand now is better than not being paid at all. Don’t be afraid to give a deep discount if your client is having problems. Giving up ten percent is a lot less than you will give up to a collection agent or law firm.

Notifying Tenants about a Foreclosure

If you have a renter who signed a lease and your property is at risk of foreclosure, that renter may have some protections and rights that you should be aware of.

Federal Law
In 2009 the federal law known as the “Helping Families Save Their Homes Act of 2009.” was enacted, with the aim of keeping tenants in a foreclosed home as long as they had a bona fide lease in place at the time of the recorded notice of foreclosure by the lender. This Act is subject, however, to a number of limitations and many tenants are still left without proper recourse after foreclosure. That law allows some tenants to finish out the term of their lease even after the foreclosure. For month to month tenants without a lease, they must be given at least 90 days advance notice of termination. This, of course is only if the federal law applies to the tenant’s specific facts. In part, the loan that is being foreclosed is a “federally related” home loan. The law protects “bona-fide tenants” as they are defined under that law.

Arizona Law
Arizona has a law that requires landlords to give written notice to tenants if the property to be rented if the foreclosure action was already initiated. Arizona Revised Statutes, §33-1331. If the landlord fails to provide the required notice, the tenant may terminate the lease, get a refund of the security deposit, and possibly obtain other relief. If the lease was entered into before the foreclosure action was started, then whatever rights exist will be determined by the lease itself – some leases contain clauses that specifically state that the Landlord may not allow the property to become the subject of a trustee’s sale.

Who has to tell the Tenant?
Not only might the landlord have an obligation to tell the renter, but if the building is managed by a realtor or property manager, they may have the obligation to communicate with the renter as well. The answer will depend on the type of tenancy and other relevant issues such as when the lease ends relative to the foreclosure date. The specific facts of each situation need to be properly analyzed before determined whether notice is needed or not.

Is Your Contract Notice provision up to date?

What is a Notice Provision Anyway?

Almost any contract that is properly drafted will have a “Notice” provision or clause. This clause states where the parties are agreeing to receive notices about matters relating to that contract. This clause is almost always treated as an afterthought. It is an item that should be periodically reviewed.

Why Does it Matter?

Unfortunately the first time the parties look at a contract after it is signed – is when something goes wrong and personal visits, email or telephone calls are not working to resolve the problem. At that point, the aggrieved party is going to want to give formal notice of its claim. Not only will the contract provide the address you agreed to use for notices, but if notice is sent to that address according to the procedure provided in the contract, your time to respond starts to run.

What you Should Do.

If you have moved and not updated your address, your rights under the contract may be jeopardized.There is much case law that holds parties to strict compliance with these clauses. Most contracts provide that you can change the address for notices, but you have to remember to do this. If the other party complies with the Notice provisions and you do not actually get the notice, your failure to keep it updates can be held against you.

If you Have to Give Notice

If a situation occurs where you have to notify the other party of your rights under the contract, pull it out and review what the contract says you have to do and follow that procedure to the letter. You might think that a email or fax might be sufficient. After all “I know they received it” seems to be a rational thought. Unfortunately, it may not be enough and if the contract does not permit notice that way – it is ineffective.

What about Electronic Notice?

While most business has moved into electronic communications, that does not mean that the law is keeping up. This is an ongoing discussion because general email services are not good providers of confirmation of receipt, confirmation of date or receipt or confirmation that the exact content has been transmitted. An email sent to the other party and to yourself, a common practice, is really not legally sufficient. There are some services such as RPost http://www.rpost.com/ and Verisign http://www.verisign.com/ which is now owned by Symantec which provide services that can confirm delivery and receipt of emails. These companies take the position that their services meet legal requirements. They well may, but I have not researched any cases challenging their claims and would not my clients to be involved in a test case.

Single Member Operating Agreements – Do you need one?

Well, if you live in a place where it rarely rains, might you still need an umbrella? Maybe, maybe not. But getting wet is definitely not as severe a consequence as having your corporate veil pierced and your personal assets exposed.

This question comes up a lot with small business owners. They file the proper documents for a limited liability company. Then they get their Articles and never look back. While the odds are small that there will be any consequence of such lack of attention to detail, if the day comes that a claim is filed, the first thing you will be looking for is those papers to show you have no liability.

Even in Arizona where an operating agreement is not required, failing or neglecting to have one just leaves another opportunity for you to be cross-examined about whether you were really operating a legitimate company or really a checkbook with a limited liability name on it.

The more you look and act like a corporate structure, the more immune your personal assets will be. A simple single member operating agreement is another step in the process of protecting yourself. It should not be expensive, but like that umbrella, is nice to have if and when it rains.

Do It Wrong and your Limited Liability Company will Not Protect You

There’s a reason it’s called a “Limited” Liability Company and not a “No Liability” Company. But just calling yourself an LLC and filing your articles of organization isn’t enough. If something goes wrong, that LLC alone won’t be enough to protect your personal assets. In fact, you may have completely overlooked creating an operating agreement, especially if you filed your own paperwork or hired a low-cost agency via the Internet.

Sure, there are advantages in LLC ownership, namely that there is flexibility in management and profits and losses can pass directly through to the owner’s personal income tax return while personal assets are shielded from liability. But if you don’t operate the LLC as a real and separate business, you may be asking for trouble.

You’ve likely heard the term “piercing the corporate veil.” When a disgruntled employee, customer, or anyone else who wants a piece of your pie chooses to sue you, that corporate veil is what protects your personal assets. However, if the court finds that you disregarded the corporate form, you’ll be left wide open.

Here are some things a court may consider:

  • Did you disregard LLC formalities?
  • Did you provide enough capital to run the business or remove capital, leaving the LLC bone dry?
  • Did you use the LLC bank account as your personal piggy bank?
  • Do you and your LLC share phone numbers, address, etc.?
  • Were your decisions to benefit you or the LLC?
  • Did you personally pay or guarantee the debts of the LLC?

So what can you do to protect your company’s limited liability? Keep your LLC papers and actions organized as if someone was looking over your shoulder. Make sure that you separate your personal stuff and your LLC: keep separate bank accounts, pay your business expenses from your LLC’s account, do not put personal funds in the LLC account, and do not use LLC funds for personal expenses. Set a percentage ownership for each owner and distribute profits accordingly, or draw an annual salary for each owner of the LLC.

By keeping everything very black and white, you’ll protect yourself and your LLC. Treat your company like the precious creation it is; it may surpass your own expectations in the long run, and such rewards are priceless.

 

Quitclaim Deed to LLC – Is it okay to do?

Protecting Your Real Estate Investment

I am often asked by clients whether it makes sense to transfer a real estate investment property to a limited liability company. This question comes up for investors who own or only a few residential investment properties. There is no question that this is probably a very good asset protection strategy. By operating the rental property through an LLC, if you do it properly, you can protect your other assets from claims of third parties relating to the specific property.

Similarly, if you own more than one property, keeping each property in a separate LLC will shield the others from being accessible to creditors who have a claim against the first property.

Keep in mind that you must observe the formalities of running each LLC like a business and co-mingle income, expenses or assets with personal ones or those of other LLC’s. You should also speak with your tax professional about how to structure the LLC’s for income tax purposes. Be aware that an LLC will not be protected from any personal claims against you since it your asset.

How to Quitclaim to your LLC

A quitclaim deed is actually a very simple process. You will need a deed form and a copy of the existing deed to make sure you identify titles properly and get the legal description of the property. Legal descriptions are written in odd language which either describes where the original description was recorded with the county recorders office or language, called metes and bounds, that read like a map with references to points, compass directions and distances. A cover sheet may be necessary. You can do this yourself, but most attorneys will only charge $75 to $150 plus small recording fees to do this for you. A title company may also be willing to help you.

I would recommend language in the deed that in some way reflects that the transfer is subject to the underlying mortgage.

Will the Quitclaim Deed Violate My Mortage?

This is another question that comes up frequently and, I think, often misunderstood. The reason for the confusion is that most if not all mortgages contain a “due on sale” or “due on transfer” clause. This clause basically says that if the real property is sold or transferred, the mortgage becomes accelerated and the entire amount is due. This is also known as an “acceleration” clause.

When you took out the mortgage to buy the property, the bank made its decision to loan you the money based upon your income, credit and the value of the real property. Seemingly the transfer of the title to an LLC would trigger the acceleration clause.

Due-on-sale and due-on-transfer clauses are regulated by the federal Garn-St. Germain Depository Institutions Act of 1982. 12 U.S.C. § 1701j-3(b)(1). That law provides exemptions from enforcement of acceleration clauses including transfers on death and transfers to trusts.

Keep in mind that the mortgage with an acceleration clause does not prohibit the transfer, but merely gives the lender an option to accelerate. There is no duty to report such a sale,but you probably should. Whether you should or not is something you should decide with advice of counsel. I would recommend that you request approval from your lender and expect that most if not all will agree as their collateral is really not being undermined since you are still on the mortgage personally, not the LLC. In legal speak, the LLC has not “assumed” the debt.

A lender might accelerate the mortgage because of title transfer when the transfer presents additional risk to the lender. The lender is concerned about ensuring that payments on the note are made and that their ability to foreclose in the case of default is protected.

Do be wary of using “trusts” to avoid triggering the acceleration clause. Several people on the internet recommend such a ploy. I won’t go into it other than to suggest you do not do this without the advice of counsel.

These days, transfers of real property into LLC’s is quite common. While technically a violation of a due on sale/transfer clause, the reality is that if the lender continues to be paid, even if through the LLC, it is unlikely that there will be any consequences. The prudent course is to notify your lender and get their written approval before you make the transfer.

 

How to Amend or Change your Contract

Changing or Amending Your Contract

There are many advantages in using standard contract forms if you do similar or multiple transactions. Often such forms have evolved from earlier litigation battles and the editing of legions of attorneys. While I often counsel clients who are presented with such contracts to have them reviews at the first transaction, they do have their use. Often the use of such contracts might reduce disputes and legal action within the industry and most practitioners are familiar with them.

On some occasions it is necessary to include specifics about a particular or specific project in the standard contract. Or, some of the terms can change over time due to the evolving course of dealings between the parties. Amending the contract IN WRITING gives you the opportunity to make changes without having to rewrite the entire contract. It also documents the course of conduct changes.

How Not to Amend a Contract:

Most contracts contain a clause that says that they can only be changed, amended or modified in writing. For businesses that are engaged in a series of transactions over a period of time, maybe even years, that clause is a time bomb if there is a dispute. Why because odds are you will have modified the terms of the contract in practice, but if there is a dispute, you may be bound only by the terms of the actual contract. It can get ugly.

Oh, by the way, marking up the original contract with notes and changes then initializing them is another recipe for trouble. It never reads the same when you look back at it when there is trouble. And, I can almost guaranty that someone is going to claim that the changes were put there after the fact.

The Right Way to Amend a Contract:

Do it in writing. But make sure that the amendment clearly references the original contract and states that whatever is not being changed in the amendment remains as is. A basic format is something like this: Amendment to Contract Form.

Might I suggest that if you are doing business under this type of contract that you periodically take a look at it to make sure that you are still doing business the way the contract says you are. If not, get your pen out and make those changes.