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Virtual Medical Group Programs Texas Tech Introduction to Contract Reviewand Negotiation Robert W. Smithee, JD Director Virtual Medical Group Programs Center for Healthcare Innovation, Education and Research Texas Tech University
Discussion Topics • Structure and Content of the Contract • Terms and Definitions • Review the Contract • Negotiate the Contract • Special Issues
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.”
Rule Number One in working with contracts (three parts) • Read the Contract! • Read the Contract! • Read the Contract!
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!
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.
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
Terms and DefinitionsAs 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.
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.
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!
Employment Status Employee Contractor Shareholder Associate/Partner Salary Guarantee Guarantee Forgiveness Termination/Discipline With/Without Cause Work Schedules Hours Call Vacation Production Educational Loans Non-Compete Clause Partnership Track Benefits Health Disability Professional Liability Elements of a Physician Employment Contract
Negotiation 101Tips 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.
Negotiation 101Tips 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.
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.