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October 15, 2000 AVOIDING LAWSUITS THROUGH "SKUNK FACTORS"When a deal goes bad, each side assesses its options. Should you cut your losses and walk away? Should you try for a compromise? Or should you play hardball and file suit? Obviously, you want to discourage those with whom you conduct business from fighting with you. You want them to conclude that their best option is to back off. To do that, you need to make yourself more trouble than you're worth. You want your adversaries to know that whether you are making a claim or defending against one, it won't be worth their while. One way to do that is at the deal-making stage. You can add terms to the deal that, after things go sour, will make your adversaries think twice about the wisdom of taking you on. We call those deal terms "skunk factors" - most predators know that, win or lose, a fight with a skunk is usually not worth it, and they generally seek out an easier prey. The same logic works in business. Here are three tried and true "skunk factors" that you might consider in your business transactions.
A word of caution . . . To be effective, "skunk factors" must be a part of your contract. Often, executives engaged in business transactions first raise the "skunk factor" after the contract is made. For example, they might include an interest rate provision in an invoice. By the time the invoicing process eventuates, however, the agreement has long since been made, and you will not be able to add terms, such as an increased interest rate, to the deal. In addition, you need to become familiar with the "battle of the forms," which will be the subject of a future Avoiding Lawsuits analysis. You send out a request for proposal with your "skunk factors" and other boilerplate; they send back a quotation with their completely opposite "skunk factors" and boiler-plate; you send back a purchase order with more of the same; they send back a confirmation with the same old stuff; and so it goes. Whose forms win? The answer depends upon how you played the game, but the message for present purposes is this: if you think you are safe just because you use lawyer-drafted forms replete with protective provisions and "skunk factors," think again. Consult with counsel so that you can be certain that the deal you think you made turns out to be the deal you actually made. SUMMARY: Emulate the skunk. Powell, Trachtman, Logan, Carrle & Lombardo, P.C. is a full service law firm with offices in suburban Philadelphia, PA, Harrisburg, PA and Cherry Hill, NJ. Powell Trachtman represents a variety of commercial enterprises, entrepreneurs and business executives in respect to their litigation, litigation avoidance planning, business formation, business transactions, estate and tax planning, and other needs. We are also approved defense counsel for numerous insurance carriers in matters pertaining to professional malpractice, products liability, employment practices, directors and officers liability, and many other fields. For more information, contact us at info@powelltrachtman.com and visit our website at www.powelltrachtman.com. ©Copyright 2003 CCG Properties LLC. All rights reserved, except that recipients hereof are permitted, for noncommercial purposes, to provide copies or excerpts, with full attribution to us, to other interested persons for their personal use. Avoiding Lawsuits is distributed for general informational purposes only. It is not a substitute for personalized legal advice from a competent attorney. |

