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Up in Arms

Prepare for litigation with these weapons of mass discussion.

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This story appears in the January 2005 issue of Entrepreneur. Subscribe »

Planning for possible litigation is one of the most uncomfortable issues in business negotiation. Many contract clauses are designed to give one side superior firepower in court. Here's the standard arsenal:

  • Service of process: This is a fancy term for the formal notice you owe the other side before you haul it into court. The rules are technical and bear directly on a court's legal authority to decide a case. So if your adversary is the type to hide when the process server comes a-knockin', you may have a problem. A service of process clause designates a "who" and "how" for service, and gets your lawsuit off on the right foot.
  • Choice of law forum: When one side is from Maine, and the other is from Arizona, and they're building in Iowa with materials from Alaska, where do you sue? Choice of forum clauses set out which court the parties will use, and a choice of law clause specifies which state's laws will apply. When used effectively, these clauses start you off with the court and body of law most favorable to you.

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