Dental and Medical Counsel Blog

Why You Should Always Memorialize Your Business Agreements in Dental Contracts

By Ali Oromchian Esq

Closeup of woman's hand writing on paperFramed in the simplest terms possible, legal disputes are expensive. They waste valuable time and money, and can cause a wealth of other issues along the way. The best way to stop this problem is to try and completely avoid disputes and work to minimize risks. By memorializing your dental practice’s business agreements in contract, you can limit the possible amounts of mitigation you will need to do later. You can even avoid trials by including binding language regarding mediation and arbitration. Overall, making sure that your contract language is both clear and detailed is the first step towards successfully memorializing your business agreements.

There are many explanations as to why memorializing agreements are important, but here are five major reasons why they should be done:

To parse out the details of an agreement – One of the most important reasons you should record your dental practice’s agreement in a contract is to provide a space to clarify the details. Examples of the types of details that you will want to record include the length of the contract, what the contract is for, and what might happen if things go wrong. In many cases, parties do not refer back to a contract until something goes wrong; having a written contract can help everyone remember the terms in an instance when that information might be needed.

To indicate who the parties and their representatives are – As mentioned above, you may not refer back to a written contract unless there is an issue. By including a listing of the parties to an agreement and who can represent them in special situations, you can be certain that there will be no doubt as to who can do what and when. In especially complex instances, the number of parties to a contract can quickly spin out of control. Having a memorialized contract can help resolve this issue.

To provide the facts and not assumptions – Another reason to memorialize a dental practice contract is to define the particular facts of the document so there is no room for interpretation. Contracts can include information related to payment, prices, costs, dates, locations, and more. These facts are integral to the execution of the contract on a frequent, if not daily, basis. Because these elements of a contract are so important, you will want to be certain that assumptions cannot be made regarding the agreement.

To include non-compete clauses – In the dental practice world, non-compete clauses can be critical to a practice’s survival. They can protect you from competition and limit business in your practice’s area. You would likely want to include this in an employment contract with an associate or other employee. In some states, non-compete clauses are unlawful or are severely limited. Please make sure you speak to an attorney before you decide to include a non-competition clause in your agreement.

To limit responsibilities and obligations - While there are certain responsibilities that you are bound to under the law, you will also want to limit your obligations for anything that falls outside of that scope. By including a statement of responsibilities in a memorialized agreement, you will define what you can be held liable for in the case of a problem in your dental practice. This would also apply to employment contracts wherein something might go wrong with an employee or member of staff.

In addition to the above five reasons that you should memorialize an agreement in writing, there are also a number of specific instances in which you should document your contract. While each example is slightly different, the common thread through each is the primary goal of protecting your dental practice from adverse effects.

shutterstock_665091280-1Employment Agreements – When your dental practice hires an associate, you will want to make sure that all of the usual information is covered in the contract: the term of employment, the pay, the benefits, the work hours, and more. This is also an instance of where you should include a non-compete clause. Other essential parts of a memorialized employment agreement are what happens during a buy-in or buy-out and retreatment. By including all of these elements in an agreement ahead of time, there will be less room for questioning if an issue arises.

Shareholder and Partnership Agreements – While you might think it is ideal to have a dental practice with a partner or solo, you must always consider the possibility that there will be a dispute. For that reason, you should memorialize a shareholder or partnership agreement in writing. Alternatively, you will need to include language relating to what happens if a partner or shareholder passes away. If that information is not covered in a contract, the heirs of a dentist could wreak havoc on a dental practice.

Selling or Buying a Practice – As with most sales, there should be a memorialized contract. Because the sale of a dental practice often involves real estate, other property, and patient information, the terms of such a contract should be very specific and detailed. If a sale is not memorialized, it is very easy to lose track of what each party wants out of the deal and what the terms of the agreement are.

Letter of Intent (LOI) Agreement – Related to the above element of buying or selling a practice, an LOI lays out the initial terms of a contract before a sale. This agreement should be memorialized because if it is not, a party could very easily opt to sell to another person before you have obtained your financing or other sales information. By obtaining a written contract, you protect both yourself and your dental practice from adverse sales situations.

In summation, while contracts might sound intimidating, their purpose is to protect all parties involved and to lay out the exact means in which an agreement should be carried out. Memorialized contracts should exhibit a meeting of the minds of each of the parties, therefore they each feel that what they believe they have agreed to is what they have actually agreed to. Because contracts can be very long and complex, memorializing them in writing is the best way to keep track of the items that are most important to your dental firm. 

Posted on 05/15/2019 at 10:45 AM

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