The problem is, there was a caveat in the contract that stated that if the property were ever moved into a trust, the minority owners could buy out his majority share at book value.

As a result, he’s probably going to lose control of the future of the property that he’s managed all these years.

The lesson is simple: When it comes to legal matters, it’s the little things that can get you.

The contract hadn’t been reviewed in years, and a few sentences buried in the agreement completely changed everything.

While all of us would much rather be thinking about how to grow our businesses rather than quibbling with attorneys over the wording used in the second-to-last paragraph of a contract, a simple oversight could lead to disaster.

When you are making deals, it’s easy to get excited and start overlooking the details. But over time, circumstances change. It doesn’t matter whether it is taxes, partnerships, mergers or estate planning. It pays to have an attorney review all of these documents not only before you sign them but also from time to time so you don’t make any missteps that would jeopardize the contract, regardless of whether you are a Fortune 500 company or a family business.

Spend a little money upfront to prevent having to spend a lot of money later on. You have to look at a relationship with a law firm as an investment in your company. For many mundane services, you can negotiate a flat fee to fix your costs and avoid any surprises.

If you take the time to build a relationship with a firm or firms, you can get a lot more value out of it. As they get to know your business better, they can advise you of potential risks that you may not be aware of.

Attorneys can also help you out in other areas, such as assembling a board of advisers to help guide you to your growth goals or preparing your business for an initial public offering. They also often have great connections throughout the business community and can help you network, as well. As you build the relationship, your lawyer can become a trusted member of your inner circle.

Make sure you talk about costs upfront, regardless of whether you are working with a single attorney on a routine matter or with a multinational firm on a major acquisition. A big reason why executives often avoid lawyers in the first place is because of the fear of costs. In this economy, every nickel counts, and being handed a legal bill that is four times what the estimate was is not something you want to deal with.

Try to get as many services as possible done for a fixed rate to control your costs. There are some services, such as litigation, that have to be done at hourly rates. If that’s the case, then ask for an estimate upfront and demand regular updates on hours worked and how far the case has progressed so you have a better idea of what your costs are going to be. If a firm won’t work with you on cost control, then it’s probably time to look elsewhere.

Laws are the rules that govern the game of business. While it can be expensive to make sure you are playing by the rules upfront, it can be even more expensive if you find out that you made mistakes later on. As the old saying goes, an ounce of prevention is worth a pound of cure.

Successor liability generally describes the result of a court’s application of various legal theories to an acquisition transaction to hold the buyer responsible for liabilities the buyer did not explicitly agree to assume. Two of the significant theories of successor liability include the de facto merger doctrine and the continuity of enterprise doctrine.

The de facto merger doctrine holds the buyer responsible for liabilities not expressly assumed under the theory that the result of the acquisition is essentially a merger of the buyer and the seller. The elements of a de facto merger are 1) continuity of management, personnel, physical location, assets and general business operations, 2) continuity of shareholders, 3) cessation of the seller’s ordinary business operations and its dissolution as soon as legally possible and 4) the buyer’s assumption of the seller’s obligations ordinarily necessary for the uninterrupted continuation of the seller’s normal business operation.

The continuity of enterprise doctrine does not require proof of the continuity of shareholders. Instead, this doctrine holds the buyer responsible for liabilities the buyer did not explicitly agree to assume under the theory that the buyer has essentially continued the seller’s business. The elements of a continuity of enterprise finding are 1) continuity of the outward appearance of the seller’s enterprise, management, personnel, physical plant, assets and general business operations, 2) the seller’s prompt dissolution following the transfer of assets and 3) the buyer’s assumption of the seller’s liabilities and obligations ordinarily necessary for the uninterrupted continuation of the seller’s normal business operations.

Some courts have also found buyers strictly liable for defects in products previously manufactured and distributed by sellers under a variation of the continuity of enterprise doctrine that, in essence, holds that responsibility for such liabilities was the price the buyer had to pay for the seller’s good will and the buyer’s ability to enjoy the fruits of that good will.

What structural steps can the buyer take to minimize the likelihood of a successor liability finding?

The buyer should obtain guidance regarding the development and treatment of theories of successor liability under the laws of jurisdictions that could potentially govern the acquisition transaction to select a reasonable jurisdiction with less expansive successor liability doctrines. The buyer should also analyze and implement potential acquisition structures with the aim of avoiding elements that contribute to a successor liability finding. The buyer may, for example, significantly reduce or eliminate common personnel and business locations since continuity of the seller’s business into the buyer’s period of ownership is a common theme in current successor liability doctrines. In addition, the buyer could require the seller to delay liquidation proceedings for a reasonable period of time to avoid a finding of prompt dissolution. While business considerations will significantly impact the acquisition structure and the integration of the acquired assets into the buyer’s operations, the buyer should remain mindful of structural components under the buyer’s control that can minimize a successor liability finding.

What contractual provisions can the buyer include to reduce the risk of successor liability?

The buyer should negotiate for an unambiguous listing of the liabilities the buyer is acquiring through the inclusion of clauses in the acquisition agreement specifically setting forth the liabilities assumed by the buyer (i.e. at the closing, the buyer shall assume and agree to discharge only those liabilities of the seller set forth on Schedule 1) and clauses explicitly providing that liabilities not assumed by the buyer are retained by the seller (i.e. every liability of the seller not assumed by the buyer shall remain the sole responsibility of and shall be retained, paid, performed and discharged solely by the seller). The terms of the acquisition agreement should clearly state that unexpected liabilities are the seller’s responsibility.

In addition, the buyer should seek to incorporate provisions in the acquisition agreement requiring the seller to comprehensively indemnify the buyer for unexpected liabilities, including liabilities accruing to the buyer as a result of a finding of successor liability (i.e. the seller will indemnify and hold harmless the buyer for any loss, liability, claim, damage or expense, whether or not involving a third party, arising from or in connection with any liability arising out of the ownership or operation of the acquired assets prior to the closing other than the assumed liabilities). The buyer should also consider including an arrangement whereby the parties will place a portion of the acquisition consideration in escrow to meaningfully support the seller’s indemnification obligations.

The buyer should consult with appropriate counsel on a case-by-case basis regarding additional and/or alternative contractual provisions to include in the acquisition agreement to further reduce the risk of successor liability.