Put down that pen! When negotiating and drafting contracts with new clients, it’s important you know not only what you’re getting yourself into, but WHO you are getting yourself into it with.
As professionals, we need to make sure our clients are who they say they are and that their motives are legally based. You have a right to know what it is your client is asking of you. Having this standard can only improve our professions.
When working with new clients, it’s important to know what you’re getting yourself into – and who you’re getting yourself into it with – before you get in too deep.
Sometimes, you should not work with a potential client, even if it’s under a contract. Conducting a thorough background check on your new clients before deciding to work with them will save you more than just time and money in the long run.
Before you negotiate or sign any contracts, you need to know who your client is – whether it’s a company or an individual – what working with them has been like in the past, and how much credit you should extend to them. Negotiating a contract with a person or company who does not exist, is not a principal for the company they are signing the contract for, or the business is not registered with the Secretary of State where business is being conducted is pointless because the contract is unenforceable.
It’s especially important for attorneys to take the initiative and investigate their own clients for their reputation for truth and veracity prior to taking on their case. Just think, what if your client lies in deposition, or on the witness stand in trial after your firm has expended all of the funding expenses for litigation?
Conducting background checks on new clients and their affiliates is time consuming, detailed work. Have your PI do it for you and then bring you an analysis of what has been found and advice on how to best proceed.
The first step to assessing whether or not you should work with a client is to find out if they are real. The company must be registered with the Secretary of State for the state business is conducted in. It’s standard business practice to request this information about a new client, so ask. If you cannot find a record of your client with the Secretary of State – either through the website or by contacting the office, this may not be a client you want to work with. If you cannot find evidence that the signatory of the contract you are negotiating with this new client is a principal of the company they claim to represent – even if the company is legit – this is not a new client you want to work with. Only principals have the legal authority to enter into a contract on behalf of the company. If your PI can’t find evidence that your new client has the right to do this, they are probably not who they say they are.
Sometimes individuals and companies can be legit, but you should not extend much credit to them. This means that if you don’t ask for money up front, you may never see it. Having a full understanding of your client through a background check will give you an idea of how much work you are willing to do for someone before receiving payment.
If you find that a company exists, the signatory on your contract is a principal for the company, and the company is registered with the Secretary of State in the state in which you are doing business, there are still some red flags to look out for.
- Does the company have any bankruptcies or late federal tax filings?
- Is the company or any of its principals currently in litigation with clients, contractors, vendors or partners? Any judgments, liens, or lawsuits? Has this ever occurred?
- What is their corporate status? OK is good, forfeit or deferred status is a red flag.
- Does the company add up? Is the company’s self description out of alignment with the information you and your PI have found? Has the company been involved in dealings that don’t make sense for the size, industry, and type they have led you to believe they are?
- Does anything else just seem plain sketchy?
Work with your PI to get a full understanding of the big picture. At the end of the day, the judgment call is always yours, but a thorough investigation and analysis is the best way to make the right judgment call and not regret your decision later on down the road.
For assistance in investigating potential clients, contact mignolet@Bellsouth.net for a consultation.