Hardwood Floors April/May 2026

Legal (Continued)

Under contract law, anything you and the other party agree on during negotiations, whether in person, by phone, or in writing, must be included in the written contract. If it’s not in the contract, it usually will not be binding legally or enforceable later.

WHAT SHOULD BE INCLUDED

REPRESENTATIONS AND WARRANTIES What are they? Representations are statements of fact about the present or future state of goods or services. Warranties are promises that certain facts about the goods or services are true or will be true. Why are they important? If a representation or warranty turns out to be untrue, the other party may have the right to seek damages or terminate the contract. These clauses help set expectations and allocate risk. Example: If the contract says Matt is not making any warranties about the condition of the yard after the tree is removed, and some minor damage occurs that is not due to negligence, John would have a harder time claiming that Matt is responsible for fixing it. Key considerations: • What promises are being made? Make sure all important promises about goods or services are included. • What is the scope and duration of the promise? Is it limited to a certain time period? • What are your rights if the promise is untrue? Can you recover damages or terminate the contract? • Are there limitations or disclaimers? For example, a seller might state they do not guarantee future performance or make promises beyond what is written in the contract. LIMITATION OF LIABILITY What is it? A limitation of liability clause sets a maximum amount or specific types of damages that one party can be held responsible for if something goes wrong. It limits how much one party has to pay the other in case of a breach, mistake, or loss. Why is it important? These clauses help manage risk by preventing large or unexpected financial losses. If your company is selling goods or services, this clause can help limit your financial exposure. If your company is the buyer, however, it restricts the amount of damages you can recover.

NOTE: This article is provided for general informational purposes only and does not constitute legal advice. The information contained herein may not be applicable to your specific situation and should not be relied upon as a substitute for professional legal counsel. Readers are encouraged strongly to consult an attorney regarding any legal questions or concerns related to contracts or risk management to ensure that their individual circumstances are addressed properly. Barbara Dunn is the attorney and owner of Barbara Dunn Law PLLC and VHUYHV DV OHJDO FRXQVHO WR WKH 1DWLRQDO :RRG )ORRULQJ $VVRFLDWLRQ 1:)$ She can be reached at barbara@barbaradunn.com or 312.825.3880. Example: If the contract states that Matt’s liability is limited to the amount John paid for the tree-cutting service, then even if the damage to the neighbor’s fence is much greater than that amount, Matt would only be responsible for paying up to that limit. This helps Matt avoid large, unexpected financial losses. However, for John, this type of clause means that John could end up paying his own money for damages that exceed the stated amount. Key considerations: • Are certain types of damages excluded from the limitation (such as consequential or punitive damages)? • Is there a dollar limit on liability (often tied to the contract value)? • Are there exceptions (such as for indemnified claims, breaches of confidentiality, or intentional misconduct)? PRACTICAL TIPS FOR MANAGING CONTRACTUAL RISK • Develop or update your company’s contract templates to reflect your business needs and risk tolerance. • Pay special attention to key clauses when reviewing another party’s contract. • Negotiate until you are comfortable with the level of risk your company is accepting. • Be prepared to walk away if the risks are too great and the other party is unwilling to compromise. Effectively managing risk and liability in contracts is essential for protecting your company and ensuring long-term success. By understanding and negotiating key contract clauses, you can better control your company’s exposure and enter into agreements with confidence. If you have questions about specific contract terms or need help drafting or reviewing agreements, consider consulting with a qualified attorney to ensure your interests are protected fully.

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