A New York Times article about two FIT grads who started a shoe company, sold it, and then wound up in court over several different issues – see link to story below – is, unfortunately, all too common. I’ve warned, as has one of my guest bloggers, to do nothing without having a lawyer review the contract – and after this story, maybe two lawyers, one a business lawyer and the other an intellectual property lawyer. This is such a sad story and, unfortunately, a common occurrence. And I hear it in all industries although fashion seems to be particularly vulnerable.
You need a solid contract. Nothing is perfect, but a good lawyer will point out the most obvious potential problems in a contract and make sure you are protected. Two really important issues are protecting your name and the use of it (trademark, brand, etc.) and making sure that if you have to leave the company, that you are compensated appropriately. Even within these two issues, there are a multitude of options and potential circumstances that must be covered. Every opportunity/contract should be viewed by you as a pre-nup. What will happen in the worst case scenario? Prepare for it and then hope it doesn’t happen.
I recently turned down a potential money making deal because my lawyer smelled a rip-off. A document was presented to me as a non-disclosure agreement (NDA), however, there was this little irksome clause that said I would not be paid for, nor receive any profits from, work I did. That clause didn’t even belong in an NDA. When my lawyer adjusted the agreement to amend that statement, the other party killed the deal.
It’s a well repeated adage in fundraising that money does not come cheaply. This adage applies to all business transactions.