Monday Morning Memo: Why You Do Not Want The Phrase Prevailing Party In Your Agreements From A Collection Standpoint
Wilson Cole, President of Adams, Evens, & Ross (AER), and Samantha Cole, in-house counsel for AER, give advice on some things they've found in client contracts that can be "ticking time bombs" which prevent successful collection down the road. The specific example that Wilson and Samantha are eager to warn clients to keep out of their contracts because they saw it in a contract recently and it made them scratch their heads is something similar to "the prevailing party will have their court costs paid by the other party." Wilson likens this language to an open invitation for the debtor to sue you if the court does not side in your favor. When cases are escalated to AER, those that go through the collections process that needs to have a suit filed are sent to AER's forwarding attorneys.
In all but one type of scenario, the suits are filed on a contingency basis and don't cost the client anything other than court costs. The one scenario where the suit is filed but the attorney's bill by the hour is when there is a counter-suit filed. The previously mentioned phrase invites such a lawsuit and assumes that the court is going to side in your favor. Wilson says it's not bad to have some language about attorney's fees, but make that language specific to the payment of the invoices.
Samantha recommends that any legal contracts you plan on getting signed looked over by an attorney to verify that the legal terms and language makes sense, because more important than sounding nice is a contract that is effective in court. Wilson says people who have "adopted" contracts from former employers or industries as their own, aka those that weren't built from scratch, should pay particular attention to the possibility of "ticking time bombs." Lastly Wilson says that in all his years in business, he has learned well that attorneys are going to attempt to pick apart your contract no matter what; it's just their job. He says it's better to have them try to do that with the claim "it's too vague" than to have them use these "ticking time bombs" in the form of language that is too specific (or doesn't make sense). The overall theme is to keep your contracts simple and straightforward. To follow up with Samantha, you can email her at Samantha@aercollections.com. Or if you have a collections issue that you want AER to take a look at, feel free to call Wilson at 800-452-5287, extension 6578, or you can email Wilson@aercollections.com.