Introduction to Contract Review and Negotiation

							        Introduction to Contract Review
                and Negotiation

                          Robert W. Smithee, JD

                                   Director
                           Virtual Medical Group
                                   Programs
                           Center for Healthcare
                         Innovation, Education and
                                   Research

                          Texas Tech University
6/20/2010
            Discussion Topics

   Structure and Content of the Contract
   Terms and Definitions
   Review the Contract
   Negotiate the Contract
   Special Issues


6/20/2010
Legal definition of a contract:

“ A promise, or set of promises, a breach
of which the law gives a remedy, or the
performance of which the law in some
way recognizes as a duty.”



6/20/2010
     Rule Number One in working with
          contracts (three parts)

      Read the Contract!

      Read the Contract!

      Read the Contract!


6/20/2010
     Rule Number Two in working with
          contracts (three parts)
           If you don’t understand the contract,
            don’t sign it!

           If you don’t understand the contract,
            don’t sign it!

           If you don’t understand the contract,
            don’t sign it!
6/20/2010
                General Considerations

   Most contracts are drafted to benefit the party who writes
    the contract.
   Either party has the right to expect that the other party
    will read and understand the terms of the contract before
    signing it.
   Neither party has an obligation to prevent the other party
    from agreeing to, or identifying, provisions which may not
    be in the other party’s best interests.
   A verbal contract isn’t worth the paper it’s written on. If
    it’s not in the contract, then it doesn’t exist.

    6/20/2010
    Structure and Content of the Contract

      Purpose of the Contract
      Parties to the Contract
      Definition of terms used in the Contract
      Body of the Contract/Terms and Provisions
      Term of the Contract/effective dates
      Remedies/Penalties
      Addendums to the Contract
      Signature Page

    6/20/2010
                 Terms and Definitions
                As Used in the Contract
   Many contracts will have a section for terms and
    definitions; if it doesn’t, or you don’t understand the term,
    get an explanation.
   Don’t hung up on legalese.
   Look in the body of the contract to make sure no unfamiliar
    or unexplained terms are used.
   Understand the effect of provisions or terms, such as
    “agrees to”, “acknowledges that”, “indemnify and hold
    harmless”, “breach”, etc.

   THERE ARE NO STUPID QUESTIONS WHEN IT
    COMES TO UNDERSTANDING A CONTRACT.
    6/20/2010
                Review the Contract
 Read the entire document and note terms or
  provisions for further explanation.
 Make sure the contract contains all appropriate
  sections, and all addendums and attachments.
 Use a checklist to review specific terms, and to
  identify and provisions not in the agreement.
  Sometimes what is left unsaid is just as important
  as the stated terms.
 Make sure you know how provisions of the
  contract will work and what your duties and
  liabilities are.
    6/20/2010
                Review the Contract (cont)

 If necessary, meet with the other party, an
  attorney, or someone experienced in contract
  negotiations to insure understanding of specific
  terms or provisions.
 Get all questions answered before a final review.
 Make a list of topics for negotiation, noting specific
  problem issues.
 Be Prepared!


    6/20/2010
     Elements of a Physician Employment Contract

   Employment Status            Production
        Employee                Educational Loans
        Contractor
        Shareholder             Non-Compete Clause
        Associate/Partner       Partnership Track
 Salary Guarantee
                                 Benefits
 Guarantee Forgiveness
                                     Health
 Termination/Discipline
                                     Disability
        With/Without Cause
   Work Schedules                   Professional Liability
        Hours
        Call
        Vacation

    6/20/2010
                   Negotiation 101
                Tips and Techniques
 Be Reasonable, start with a good attitude.
 Negotiation is give and take; you may not get
  everything you want.
 Decide what you want to negotiate; make a list.
  Note what is nice to have and what is a deal-
  breaker.
 Who was that masked man? Don’t waste time
  negotiating with someone who cannot make
  changes to the contract or make a decision.
    6/20/2010
                   Negotiation 101
             Tips and Techniques (cont)
 Schedule enough time to review and negotiate
  the agreement, don’t be rushed to make the
  deal.
 If there are important issues not addressed in
  the contract ask for additional documents or
  information, such as call schedules.
 If any changes in the contract are agreed to, get
  it in writing.

 6/20/2010
                 Special Issues

 Some contracts can’t be negotiated, or will have
  some terms that can’t be negotiated; be realistic.
 Ask to review other documents that may impact
  provisions of the contract, such as partnership
  agreements, productivity reports, financial
  information.
 Once the contract is signed, it is legal and
  binding. Challenging terms of the contract after
  the fact is expensive and time-consuming, even if
  you are right.
    6/20/2010