Author: Luci Prosapio

From the Business of Business section of How You Can Avoid Legal Land Mines by Joseph S. Lyles (2003).

John, an older man, orally negotiated the terms of his employment contract with his new employer. He gave his employer’s representative a copy of a written contract that he wanted the employer to agree to. During his negotiations, the representative assured John that he would submit the proposed contract to his supervisor and they would provide him with a written contract with the same or similar terms. Of course, John never received the promised written contract, and he started working with the belief that his new employer had agreed to his contract terms.

What made having a written contract so very important to John was the nature of his business. He worked as a food broker and represented particular lines of food or brands. The producers of those lines tended to be loyal to their brokers, so the new employer knew he would gain those particular food companies as clients if he hired John.

The new employer later fired John and tried to give his lines to a new, younger broker. But his plan didn’t work because John’s lines (companies) refused to work with the new broker, so John was rehired a few days later.

The employer began making life difficult for John, whose health had been declining. Eventually, the employer pressured John to retire, but he also held onto John’s lines. John received nothing in return for those lines upon his retirement.

John was certain he was discriminated against because of his age, and that he was tricked into giving up his lines. Likewise, John was not compensated as fully as he had delineated in his contract proposal. Without a written contract, there wasn’t much John could do about his forced retirement. He couldn’t believe that at the end of his long career he had been so badly mistreated. But, if he had simply insisted on a written contract before he began working, he could have avoided this legal land mine.

The Lesson: Oral business contracts, especially oral employment contracts, are difficult to enforce. Always get important contract terms in writing.

From the Business of Business section of How You Can Avoid Legal Land Mines by Joseph S. Lyles (2003).

A common cause of legal problems in business deals is the failure of the parties to write down their agreement or, in other words, to make a written contract. It is human nature to believe that you and your business partner(s) fully understand each other, especially when you are at the beginning of a business relationship. You believe you can trust the other person to live up to his word. You are happy that you are in agreement with the other person and that you are embarking on a mutually advantageous venture.

However, the circumstances of people’s lives and their businesses change. Interest rates, growth rates, technology, and prices of materials are just a sampling of business variables that tend to change over time. A change in a partner’s life will affect you, too.

The memories and interests of owners are also inclined to diverge as a business progresses. You might walk into the office one day and see that you no longer see eye to eye with your associates. Then small disagreements grow into large disagreements and you find yourself in a lawyer’s office. For example, you and your partner may disagree over which of the out-of-pocket expenses you each have incurred for gas, hotel bills, supplies, etc., should be reimbursed from business assets. Without a written contract, disagreements are likely to arise.

The Lesson: Without a written contract to refer to, your case in court would simply amount to a swearing contest. Then you will kick yourself for not putting your agreement in writing.

From the Business of Business section of How You Can Avoid Legal Land Mines by Joseph S. Lyles (2003).

Fred went into business with a partner to sell mobile homes. To operate, they had to establish accounts with various suppliers. The suppliers wisely required Fred and his partner to sign personal guarantees of the accounts.

When Fred decided to exit the business, he overlooked an important detail – he didn’t cancel the guarantees to the suppliers. Fred’s partner kept the business going for eight more months and ran up substantial charges for supplies on the accounts. When the business failed and the partner vamoosed, the suppliers sued Fred.

If a guarantee has a cancellation clause, it must be followed precisely; however, you may still be responsible for the balance due at the time you cancelled the guarantee. The same rule applies to other authorizations and joint obligations you may have signed. When exiting a business, remember to formally notify all banks, credit card companies and other creditors that you are no longer responsible for the business debts.

The Lesson: Be careful whom you go into business with because leaving them may not be easy. Make sure to cancel any personal guarantees before you exit the business. If you are involved in a very complex business or one involving high potential liability, contact an attorney to obtain guidance on other steps you can take to limit your liability.

From the Business of Business section of How You Can Avoid Legal Land Mines by Joseph S. Lyles (2003).

Rick’s Case

Rick, a hard-working client of mine, ran his own small business doing grading, hauling, back-hoe projects and related work. He bid upon and was awarded a job demolishing some old industrial buildings and hauling them off.

One of the people who hired Rick told him he could simply haul the refuse down the road a short distance to a vacant piece of property. Of course, Rick thought that having a close disposal place would save him considerable time and money.

Unfortunately, the owner of the vacant property had never granted permission to Rick or his customer for the disposal of such debris upon his land. Law enforcement and environmental officials were called, and Rick faced criminal prosecution for unlawful dumping. He also faced administrative penalties for improper disposal of asbestos, which was found in the dumped materials.

Unbeknownst to my client, the old building he was demolishing contained friable asbestos, a carcinogenic substance. Hew as ordered to remove the hazardous material immediately from the site and to pay for its proper disposal. Consequently, Rick incurred great expense for the extra time, equipment, and disposal fees the clean-up required.

What had seemed like a legitimate, profitable project to Rick quickly became a huge financial burden. With legal assistance, Rick was able to get the administrative penalty lowered, but his only defense was ignorance. And, as the saying goes, ignorance of the law is not excuse.

Rick believed that the people who hired him know the building contained asbestos, but intentionally failed to disclose it. However, he did not have any proof. As a result, he was never reimbursed for all his added expenses.

Encountering hazardous waste on a job site is one of the risks that should always be covered in a business contract. And, of course, you should insist on full disclosure of hazardous materials whenever you work at a job site, especially one with which you are not completely familiar. Finally, never assume you can dump waste materials on anyone’s property without written permission from the owner.

The Lesson: A reasonable dose of prevention, such as avoiding bad business customers, can avoid a very expensive cure!

From the Business of Business section of How You Can Avoid Legal Land Mines by Joseph S. Lyles (2003).

Steve, who was well educated and very bright, went into business wit ha couple of people who claimed to have the know-how to manufacture and sell small trailers, called tow dollies. Because they didn’t have the capital to expand the business past the very early stages, they talked Steve into providing the capital in the form of cash and bank loans that he personally guaranteed.

A personal guarantee is a written contract that binds the guarantor to pay bills created by another party, usually a business the guarantor owns. Banks and suppliers typically require partners or corporate owners to sign guarantees for loans or credit to their businesses.

Unfortunately, Steve relied completely on what he was told by these persuasive entrepreneurs. He didn’t receive any independent advice on limiting his risk or protecting his interest in the venture. He was an easy victim of mismanagement or fraud by his partners.

After a year, and a few tow dollies later, the business collapsed and left Steve holding the bag to the tune of half million dollars in bank debt. Steve didn’t have any of the financial records of the company, and the entrepreneurs claimed the records were lost. He had stepped onto a legal land mine.

When Steve finally did consult a lawyer, all the assets of the company were gone, and the one company document he had received from his partners did not even create the legal entity Steve thought it had.

Steve was left with the difficult decision of whether to bring an expensive lawsuit against his former partners, who had few ready assets, and one of whom had filed for bankruptcy. Because there were no documents, the trial would have boiled down to a swearing contest. And, if he did win the swearing contest in court, all he would likely get would be a judgment for money. Judgments can be very hard to collect, especially if the person owns no equity in real estate to pursue.

The Lesson: In a business deal, relying on what someone else tells you can be an expensive mistake. Insist on written documentation of every aspect of the business. Carefully monitor how the money you invest is being spent.

From the Divorce section of How You Can Avoid Legal Land Mines by Joseph S. Lyles (2003).

It really doesn’t sound fair, but often the party who has possession of anything over which a legal dispute has arisen has an advantage in the struggle. For example, in a child custody dispute, the person who has the physical custody of the child at the outset of the dispute usually has a distinct advantage. Of course, the courts will not reward kidnapping, but if your physical custody of the child is not illegal, you will be better off in the custody battle that ensues.

Another example is that possession of real estate or other property gives you several advantages in a legal dispute over that property. It is easy for you to protect the asset from harm from a third party, and it is easy for you to have the property appraised. In addition, it is often an advantage to be able to use and enjoy the property during the pending dispute.

A final example of the power of possession is a case in which a Family Court judge awarded a spouse involved in a divorce the temporary custody and control of a dog and horse. In this case, she sold the horse and had the dog put to sleep. While the husband was convinced she took those actions just for spite, it was difficult to prove because she had plausible reasons for why she had to take them.

The Lesson: Try to maintain possession over any property that is the subject of a legal dispute. Having physical possession gives you the ability to preserve, appraise, use and protect the property during the pendency of the lawsuit.

From the Divorce section of How You Can Avoid Legal Land Mines by Joseph S. Lyles (2003).

Many people who divorce see it coming, but given the emotional turmoil they are in, it is not surprising that they fail to take sufficient steps to protect their finances from the machinations of their estranged spouses.

One of the precautions that spouses typically fail to take is closing or depleting joint accounts of all types. Credit card accounts can be difficult because any existing balance will prevent them from being closed. But you should be able to get the account coded so that no further charges can be made. If you don’t feel comfortable about completely depleting a join account, then at least do so by one-half the balance.

A joint account that is often overlooked is a checking account credit line, usually established to prevent bounced checks. Unfortunately, the first spouse to think of it can use the entire line of credit by withdrawing cash, yet the other spouse is still liable on the debt to the bank.

The Lesson: As soon as you hit the choppy seas of marital discord, you should close, suspend or deplete your joint accounts.

From the Divorce section of How You Can Avoid Legal Land Mines by Joseph S. Lyles (2003).

It is amazing how many wives in this day and age do not know how much money their husbands make. Whether her husband is a construction worker or a business executive, many a wife just doesn’t know the amount of his actual income, and may not have any idea what he spends his pay on, whether it is stocks, gambling, booze, other women, cars, bass boats, real estate or clothes. Occasionally, it is the wives who make and spend the money and the husbands don’t have a clue.

Because a major part of any divorce is dividing the martial property and liabilities, it is important to know your spouse’s true financial situation. Many spouses involved in divorces have tried to hide at least some of their income and/or assets. Once you have separated from your spouse it can be very difficult to determine the truth on these issues.

Thus, you should always get your own copy of the tax returns each year, and you should study the return to try to get a clear picture of your joint financial situation. Then if you separate from your spouse, you will easily be able to explain your finances to your attorney who, in turn, can ensure you receive all you are entitled to in the divorce.

Sometimes tax returns will either not be filed or will be inaccurate. If your spouse gets paid in cash, for example, as a subcontractor on a construction job, it can be very hard to prove in court what he or she makes in actual dollars. Your best bet is probably to keep track of who is paying your spouse so you can subpoena the employer to testify in Family Court. Also, if your spouse makes any loan applications keep a copy of the application for your records because it will document his or her income.

The Lesson: When it comes to your marital finances, what you don’t know can hurt you. Without this knowledge, you will not get your fair share of marital assets in a divorce.

From the Divorce section of How You Can Avoid Legal Land Mines by Joseph S. Lyles (2003).

Custody issues concerning minor children can be extremely tough to handle. Because parents and grandparents usually have strong feelings of love and responsibility for their children or grandchildren, custody battles are always highly emotional. And those feelings of love and responsibility often foster feelings of hate towards anyone trying to take custody away and guilt over any alleged or perceived failings in the proper care of the children.

I’ve had clients who voluntarily relinquished custody of their children to the other parent or to the grandparents due to financial hardship, only to find that the temporary custodians refused to return the children later when my clients were in a better financial position.

I’ve even had a mother almost be denied custody of her children when they were in the hands of an aunt and uncle. The father had legal custody and had turned over de facto or actual custody to the aunt and uncle while he was stationed overseas with the military. The father was killed in a car wreck while serving overseas. When the mother asked for the return of the children, the aunt and uncle refused. Litigation ensued, but it took several months and thousands of dollars for the mother to regain custody of her children.

I also know of a father who accepted physical custody of his children when the mother no longer wanted custody of them. He stopped paying child support but took no court action to change the legal custody. Later, the mother demanded them back and asked the Family Court to hold him in contempt for not paying the child support. He was in a very perilous position and could have gone to jail if he had been found in contempt.

The Lesson: Don’t ever violate a formal custody order issued by a court without immediately retaining an attorney to transfer the custody legally. Likewise, be warned that temporary custody changes can become permanent custody changes.

From the Divorce section of How You Can Avoid Legal Land Mines by Joseph S. Lyles (2003).

Barbara separated from her husband when he left the marital home. She later discovered that several months before he left, he stopped making the mortgage payments. And after he left, he managed to keep the foreclosure notices from being received by her. Then the house burned to the ground.

The fire insurance company that carried the fire insurance on the home began an investigation of her claim. It discovered that the home had been foreclosed upon and the court had issued an order that transferred the title of the home to the mortgage company.

Because my client was no longer the legal title-holder to the real estate, she could not pursue the fire insurance claim. As her attorney, I tried to get the court to reopen the foreclosure case, but it refused. Her divorce was already final at that point, so she was at a dead end.

The Lesson: Always keep track of the status of your mortgage and other important payments, especially if you separate from your spouse.