Is an offer letter a contract? In short, most likely, it is not. When a professional is entertaining a new position, many employers offer an offer letter, also known as a letter of intent. And then, that letter will break down the basics of the employment relationship. It’ll list compensation, potential bonus structure, probably the term of the agreement, how long it lasts, and maybe a few of the benefits: if there are non-compete, non-solicit, and if professional liability insurance is needed, perhaps who pays for tail insurance. So, just like essential bullet points, these are the things that will be incorporated into the employment contract.
Now, it does make sense to negotiate the main terms of the agreement before signing an offer letter. It’s kind of bad form to agree to a salary, get the offer letter, and then continue to negotiate after you’ve already negotiated. However, there are many times when you’ll agree to an offer letter. Then the employer will follow up with an employment contract. Then the employment contract agreement terms may be much different than you were expecting. Maybe the specific language of the non-compete was much more restrictive than you were anticipating. Or perhaps if you’re paid purely on collections, the end of the collection as soon as the contract is terminated. Then you missed out on 60 to 90 days of collections that percentage you should get.
Is the Offer Letter Binding?
Once you sign the offer letter, the question is, is it a binding contract? And the short answer is no. It’s not. Unless there’s specific language in the job offer letter that states this is binding in some way, which would be extraordinarily rare. It’s just not done. Maybe in like academia when it’s more of a thorough offer letter, and that’s all that they’re providing. And then they’re just referring to a bunch of policies and procedures. Still, if it’s just a typical professional environment, then no, the offer letter will generally be general; these are we’ve agreed on terms.
An Offer Letter Is Not a Contract
However, the professional can continue negotiating, even if they’ve signed an offer letter. And even regarding the terms on which they have already agreed. The employer will likely not be happy if you come back at them and ask them to renegotiate terms. But if you’re going to do that, you need to explain why you’re doing it. Meaning, yes, this salary at 250,000 annually made sense. Still, you’re also giving me a three-year non-compete that covers five counties, which will effectively make me move once an agreement terminates.
Taking that into account, 250,000 is not worth me taking this job. So, giving the employer context as to why you agreed to compensation at one point, but now at this point, it’s no longer an amount you’re willing to work for is essential. And I think most intelligent employers will understand that nothing is final until you sign the employment contract agreement. Even though you’ve agreed to terms in the offer letter, it doesn’t mean that you can’t reopen those, but you must keep in mind that it may tick off the employer in some way.
Negotiate Terms in the Contract That Are Not in the Offer Letter
Now, what about terms that aren’t listed in the offer letter but are detailed in the employment contract agreement? Those are absolutely the terms that you should try to negotiate. And when I say negotiate, what do you do? If you have a signing bonus, ask for a little more. If you have a non-compete, try to reduce the amount of time of the non-compete and try to reduce the geographic restriction if they’re not going to pay for professional liability insurance or tail insurance after the contract ends. Try to work out an agreement where they’ll pay for all of it, or maybe a portion of it.
As I stated before, if there are bonuses involved, you want to make sure that you’ve earned those bonuses or want to get them paid. Even if you’re not employed at the time that they’re typically paid out or maybe get them prorated. Many employees will get a signing bonus if there’s a forgiveness structure. And then in the contract, it’ll state that if they leave before this period, they’ll have to repay a portion of it. If you have annual forgiveness, then get that reduced to either quarterly or monthly forgiveness.
Expressly, if you have a two-year term on the agreement and were given a $20,000 signing bonus, it may state that for each year you’re here, it’s forgiven one-half. Well, the employee should get that reduced to monthly. Because if you leave in the middle of the year and it is yearly forgiveness, you missed out on six months of forgiveness. Whereas if it’s monthly, you have six of the twelve months forgiven.
You can negotiate plenty, even from when you’ve signed an offer letter to a contract. In general, it is not binding. And you can constantly renegotiate terms. Once you sign the employment contract agreement, yes, those terms are final, and you’ll have to stand by whatever you already agreed. But as far as the offer letter goes, it’s still negotiable for the most part.
Other Blogs of Interest
- What Happens After You Sign an Offer Letter?
- Can a Physician Back Out After Signing an Offer Letter?
- Career: Can I Quit my Job if I Signed a Contract?
Can an Offer Letter be Revoked?
I’m going to talk about a scenario where an employer would say. I need you to sign this offer letter.” Once we have the signed offer letter, we will follow up with an employment agreement. It is not a scenario where they give you an offer letter, and that’s it. There are some industries, I mean, I’m a lawyer. I know in most law firm environments, none of us sign employment contracts. Almost all of us are just at-will employees, and we get an offer letter that goes through the terms, and that’s it. You will have an employment contract in many other industries, especially healthcare and sales. It states how the employment relationship will be handled with compensation, benefits, termination, malpractice insurance, and restrictive covenants. It details the kind of the relationship’s nuts and bolts.
A Rescinded Job Offer is Exceedingly Rare
Today, it’s just when you get an offer letter, and then they follow up on the employment contract. In short, can an offer letter be rescinded? Yes, it can depend on extremely rare occasions. An offer letter would have language that states it’s binding in some way. It is just exceedingly rare. I usually see it only in academia, where they don’t have employment contract agreements. It’s more like a longer offer letter that refers to a bunch of policies and procedures. Still, in a normal work environment, they will say, alright, let’s come to terms on the basic outline of the employment relationship.
We’ll both sign the offer letter and follow up with an employment agreement that goes into detail. It gets into the nuts and bolts of, for instance, if they say there’s a non-compete, how long is it? What’s the geographic restriction? How many points does it entail? Is it specific to the profession or the specialty of the professional in the situation? You’re not going to get details like that in the offer letter.
Let’s give an example. Let’s say you’re in sales, they say, alright, let’s come to terms. You’re good on the comp, on the benefits, on the bonus structure, on the non-compete, and you sign the offer letter. And then, three weeks later, you still haven’t received the employment contract and have not looked for any other positions because of this, relying upon that job. But then the employer states, you know what, we’re not going to be able to go through with it currently. And then they take the offer letter away. Well, they can do that. That’s just an unfortunate part of doing business.
In the Same Way, You Can Back Out From the Written Job Offer
Think of it from both perspectives. Suppose you signed an offer letter and decide to back out of a better job, moving, family concerns, whatever it is. In that case, you also want the opportunity to get out of that offer letter. And it’s going to go both ways. Either party can already decide to back out of the offer letter, assuming there’s no binding language, which, as I said before, is exceedingly rare. So, yes, an offer letter can be withdrawn. You don’t have to go through with it. You don’t have to offer an employment agreement if you’re the employer. If you’re an employee, it’s bad form to sign an offer letter and decide not to go through with a job. Still, I would never recommend someone sign an employment agreement they’re uncomfortable with. And the terms of an offer letter can look great on the surface.
And then, when you get into the details of the employment agreement, it can change how it looks. It may state the terms of the bonus. You’ll get this much per year. But it may not say, but if you terminate the contract, you won’t get any of the bonus that you earned that year or some.” You know, there are details you can’t find in the offer letter. Once you see them in the employment contract agreement, they can change the context of the situation. The offer letter can be rescinded but you also don’t have to go through with it. If you’re an employee, it works both ways. And that’s just how the professional arena goes, as far as the offer letter or letter of intent is concerned.
Can an Offer Letter be Revised after Accepting?
Can an offer letter be revised after signing it? In short, yes, it can. There are infrequent times when an offer letter, also known as a letter of intent, would be binding upon a professional. I mean, it would need to state that the terms of the offer are binding explicitly. And typically, in that case, it would be something in academia, and it would be much more detailed than just a typical employment contract in a company. I can’t recall a time where an offer letter said it is binding with an employment contract agreement to follow that would also be binding. And there are several reasons why most employers don’t do that. First, from the employee side, receiving an offer letter will break down the basic terms of the employment relationship.
When a Job Offer Proves To Be Something, You Didn’t Expect
The compensation, productivity, bonuses, the length of the term, how long the contract lasts, how an offer can be withdrawn or terminated, some of the benefits, malpractice insurance, if necessary, the restrictive covenant, non-compete, non-solicit, non-disparagement confidentiality. It’s basic terms. An offer letter is usually a page or two at the most. In contrast, a standard employment agreement is at least 20 pages and could be longer. It’s just basic terms. Now, if you look at basic terms and say, you know what, that’s an excellent salary.
I’m okay with that. And maybe it just says it has a non-compete but doesn’t have the actual terms, and then you agree to sign the offer letter. But then, when you get the employment agreement, have some context and specific language provided. It could change from a job contract you thought would be great to not so great.And let me give you an example. Let’s say, in the offer letter, it says, yes, there’s non-compete. But you notice it doesn’t have any terms. Then you look at the actual employment contract agreement. The non-compete lasts for three years and a hundred miles from your primary practice location, sales territory, or whatever.
Well, that job offer where the comp looked great, maybe the benefits look great. If the non-compete forces you to move from your current community, that may be a deal-breaker for some people. Perhaps you can go back to them and say, hey, I’d like the terms of this non-compete reduced. It is not what I was expecting. It’s much more restrictive than usual. And for me to feel comfortable signing this agreement to the job offer, we need to change these terms. It’s your legal right to voice out your concerns.
Contextualize Reason For Negotiation
The terms may not have been in the offer letter, but you want to get the terms changed before you sign the employment agreement. What if the employer says no? Let’s say they say, no, we’re not willing to change the terms of the non-compete. Well, you could go back to them and say, I know we already agreed to a base salary. However, if I accept the terms of this non-compete, it’s not worth what I decided to initially. It’s worth a hundred thousand more for me to agree to this.
Although we initially settled on the base salary in the offer letter, I’m not okay with that now. I’m not going to accept that now. And if you want me to sign this employment contract agreement, we will need to change the compensation structure. That’s fine. The employers may be upset. They may be ticked off. Still, when you do something like that, you’re coming back at them and renegotiating already negotiated terms that were listed in an offer letter. You need to provide context and reasoning for why.
And non-compete is a good example. I didn’t have the terms of what it would be. Now that I notice those specific terms, I’m not okay with it. And this is one of the reasons why I want changes to other things. I think any savvy employer is going to understand, okay, well, I mean, that makes sense. Now, they may not be willing to make any changes. And as I said before, they may be slightly upset that you’re coming back at them. Still, I would never suggest that a professional should ever sign an employment contract agreement with terms. They’re not willing or comfortable just because they signed an offer letter and agreed to the terms of an offer letter. Unless there’s a claim that it is binding, it is not binding.
You can still negotiate terms even though you signed the offer letter. And even though you negotiated them initially. It is much better to tick off an employer and maybe reach terms than to accept terms with which you disagree. If you go into a new job and feel like you’re not being appropriately compensated, or you are concerned about one of the restrictive covenants. Most people don’t last that long in those positions. You want to feel good going into a new job. You want to have a smooth relationship with your employers. If you don’t feel good even if you’ve signed the offer letter, don’t go through with taking on the new job offer and starting a new position. It’s your call.
Can You Reject a Letter of Intent?
Can you reject a letter of intent? The quick answer is yes, you certainly can, and should, if you’re unhappy with the terms of it. A letter of intent, also known as an offer letter, can be provided to the job applicant once negotiations or discussions about a position move forward. Usually, it would work if a potential job candidate would find out about a job offer. Either through a job listing, word of mouth, maybe they were reached out through a recruiter, there’s a discussion of the main point to the position like the salary, benefits, that type of thing, location. And once there’s interest on both sides, many employers will offer a letter of intent or offer letter. And that is a description of the main points of the employment relationship.
What’s in an Offer Letter
In most joffer letters, there will be the start date, location, and length of the job contract, which is called the term. Maybe a brief discussion on how the contract can be terminated, compensation, so is there a base salary? Are there bonus opportunities? Is it net-collections, or commission-based, RVUs? It would be a brief description. It wouldn’t go into a long four paragraphs about comp. If malpractice insurance is necessary, who pays for that? Is it the company or the employers? And who pays for the tail insurance if that’s necessary as well? Are there restrictive covenants? The restrictive covenants are usually a non-disparagement, a non-solicit, a non-compete, and it might go through briefly like this is how long go last.
And maybe this is the geographic restriction enforced by the company or employer associated with the non-compete and then a brief description of the benefits like health, vision, life, dental, disability, retirement, and maybe expenses. What expenses will be paid by the employer? That’s what would typically be in an offer letter. The job candidate, when viewing this letter, if the terms of it are unfavorable, or maybe not what the job candidate was looking for, they can say, no, I’m not interested in this. I’ve read the terms. I’m not going to sign this. I wouldn’t suggest just flatly saying to the employer, no, I’m not taking this job. Take a hike. It would simply make sense to counter. You can say, I’m not going to sign this job offer. However, these things would make this opportunity to work for this company good for me.
An Offer Letter is Negotiable
So, if you’re offering a 200-base salary, then maybe I want 250 or a signing bonus of 10,000, and I want a 20,000-signing bonus. And are you going to provide relocation assistance if I must move into a new city? These are all things that should be done at this stage. Even though a professional has been given an offer letter, it doesn’t mean that’s rescinded.
And then, even further, if you come to terms with the offer letter, what will then follow will be an employment agreement. Even if an offer letter has been signed, unless there are languages that claim this is a binding offer letter, no terms can be changed, which you will rarely see. Once you get the job offer employment agreement, you can still negotiate terms. So, you need to think strategically, alright? Am I happy with what the offer is? And then, what is my leverage in negotiating new terms? I would suggest never signing an employment agreement with which you disagree.
Even if you reject the offer letter, and even if you decline the employment agreement, it does not mean that the negotiation is over. Suppose the professional is reasonable in what they’re asking for. In that case, I find most employers expect at least some negotiation when they’re bringing in new job candidates. I mean, it is the expectation. But once again, if they’re reasonable.
Ask for Reasonable Changes to the Contract
Suppose an job applicant is asking for a 200% increase in base salary. In that case, the employers are likely going to, look, you are delusional, and we will withdraw the offer and move on to a different job candidate. With the job offer rescinded, you’ve already missed your chance at negotiation.
So, it helps the professional understand their profession’s industry standards. That way, a job candidate, they can ask for reasonable changes to the job contract. There are also many times when you’ll get brief details in the offer. Then when you see the actual written language in the agreement, it substantially changes what it looked like in the offer letter. Maybe if it just briefly mentions there will be a non-compete, but once you review the job offer employment agreement, it’s a terrible non-compete.
Maybe you expect a one-year non-compete, and the employer offers three, or you’re expecting a small geographic radius of 10 miles. They came back with a hundred, or something like that. That can change from “yes, this is a great offer” to “there’s no chance I would ever accept this new job offer.” So, there can be negotiation throughout the process up until the professional signs the employment agreement. At that point, those are the terms. It would help if you made certain before you sign anything that you’re okay with what is in agreement. And then understand there will be obligations after the relationship with the employer ends.
What Happens After You Sign an Offer Letter?
What happens after you sign an offer? There are two main distinctions. One, a professional could be given an offer letter by the employer, and that’s it. No employment contract follows. It’s just you agree to the terms of the offer letter, and then you start the job. And then, the second way would be the employer asking the potential employee to sign an offer letter, agreeing to basic terms. And then, at that point, they’ll incorporate those terms into an employment agreement and offer the employment agreement to the prospective employee. Then that person needs to decide if they want to sign the employment contract agreement and then move forward with the relationship. Let’s first go with if you begin an offer letter with no employment contract agreement to follow.
In that scenario, you’re most likely in an at-will employment relationship, meaning the agreement or the employment relationship can be terminated at any time, for any number of reasons, with no notice unless it’s specified in the offer letter. And then, for the most part, there wouldn’t be any restrictive covenants that follow when the employment relationship ends. Restrictive covenants could include a non-solicitation agreement and a non-compete. T
hose are the two most common or the two that matter the most for most employees. If you negotiate, hiring employers would provide you an offer letter that goes through basic things, such as compensation, benefits, start date, and that’s about it. I would say most licensed professionals usually would sign employment contract agreements. Attorneys don’t, for the most part, but almost any employee in healthcare, health physicians, nurse practitioners, PAs, vets, chiropractors, and dentists, always sign employment agreements.
Not Required to Take On An Offer You Signed
Let’s say you’re in another situation where an employer gives you an offer letter, and you agree to the terms. Then they’ll follow up on the employment agreement. Many people ask, alright, what if I’ve signed the offer, but when they give me the employment agreement, it doesn’t look so great. Do I have to go through with the job offer? The answer is no. Unless there’s strange language in the offer that states it’s binding, which would rarely happen if they follow up with an employment contract agreement, you can still negotiate terms.
Allow me give you an example as a guide. Let’s say in the job offer it just states there’s a non-compete, but it doesn’t have any details. So, you get the job contract, and then you look in the non-compete, and it’s five years and covers an entire state. Like you will have to move out of the state if you want to continue in your profession. Well, that’s not a reasonable non-compete, but that could make a job offer that may have looked great at a hundred thousand a year be only worth 200,000 a year if you’re going to accept that terrible non-compete.
Provide Context For Disputing Job Offer
Even if you’ve accepted the terms of the offer, it doesn’t mean you have to go through and execute the employment contract agreement. The employer will probably talk about, well, you agreed to the terms, and now you’re returning to us. So, I find it is most effective if you provide some context as to why the job offer letter did look good at the beginning. Still, after reading the actual details of the employment contract agreement, it’s not so good.
I think most intelligent employers can understand that and appreciate that. If you just come back at them and say, no, now I want to double the salary, the bonus, or whatever it is, without providing any context. I assume the employer will not be pleased with that and may even revoke the offer. So, what happens when you sign an offer letter? First, an employment contract agreement will likely follow, and then you’ll have to determine if you want to go through with that, or they’ll give you the offer letter. It’s an at-will relationship; you can leave at any time, and there likely aren’t any strings attached to it.
Can an Employee Terminate an Employment Contract?
The short answer is, obviously, yes. However, it will be determined based on the terms of the contract. In any employment contract, there will be a section that deals with the times, the contract’s length, and then termination, so how that contract ends. Let’s first talk about the terms of the agreement.
Most employment contracts will have a date, meaning it’s a year-long, two-year, or three-year contract. Then if the agreement doesn’t terminate, it will state a language. It will automatically renew for successive one-year terms. In that case, if a contract isn’t closed in another way after the initial period ends, it’ll just continue forever until terminated.
I would say there is a rarely fixed term with no language about automatic termination. If it’s just a two-year fixed term with no automatic renewal, it would just end at the end of two years, and that would be it. The parties can go their ways.
What Are the Reasons for Contract Termination?
Now, regarding terminating the contract, the first part is that if there is no renewal, it ends, and the employment contract ends. Second, by mutual agreement. Suppose the employer and the employee agree that the relationship isn’t working. In that case, they can always, by contract, decide to move on, and then that’s it, you can move on. Next would be with-cause termination. In this case, if someone breaches the employment contract, there’ll be language that states why the employer can fire the employee. If you need a license to perform the activity and lose your license, or if insurance is required and you’re uninsurable. There are, I guess, vague behavioral clauses.
If you’re disabled, you die, I mean, ordinary things, but there should also be a part called a cure. And so, in that case, if one of the parties believes the other party is in breach of an employment contract, the most common reason is just payment concerns. Either someone is unpaid, they were promised an amount in the associate employment agreement, or maybe the timing. Also, the bonus payment is involved, and there is disagreement over the professional owed amount. That’s always a big, I guess, reason why there would be an allegation of breach of contract.
What Happens if Breach of Contract Is Committed?
If you believe the employer was in breach of an employment contract, you’d have to provide them with written notice. And then the cure period means the employer would have a period to fix whatever the breach of associate contract is. Typically, that’s somewhere between 15 to 30 days. And the same can go for an employee.
If the employer thinks the employee is in breach of contract, they give them written notice, and then the employee has 15 to 30 days to fix the breach. If the breach is unfixed, the other party still believes the other party is in breach. Usually, that party has the option to terminate the dental associate agreements immediately. The last and most common way in most employment contracts is without-cause termination. There’ll be language that states that either party can terminate the employment agreement at any time, for any reason, with a certain amount of notice to the other party.
Typically, it would be somewhere between 30 to 90 days. Suppose the professional is unhappy and wants to move on. In that case, they give written notice saying I’m utilizing the without-cause termination notice in the employment contract. Then they must work out 30, 60, or 90 days. Then at the end of that period, they can move on without any concerns regarding terminating the employment contract. Yes, an employee can terminate an employment contract, but they must follow the terms of the agreement.
Employment Contract Termination and Non-Compete Law
Just because an employee terminates the contract doesn’t mean it necessarily ultimately ends at that point. They could be required of the employee if they terminate the contract. Many times, if given a signing bonus or relocation assistance, The employee would have to pay back a prorated portion of that if they left within the initial term of the employment agreement. Others could have non-compete associated with it.
So, just because an employee terminates the contract doesn’t mean that the non-compete doesn’t apply. It does, or at least it does in most circumstances if you’re in a state where non-competes are enforceable. How long will that last if there is a geographic restriction and then some temporary condition? That will continue even if the employee terminates the contract. If some malpractice insurance is involved and tail insurance is needed, it will say who must pay for that in the contract. Employees may also be responsible for that if they terminate the agreement. Although the employee can terminate the employment agreement, it doesn’t mean that there aren’t at least some strings attached.
One of the highest priority things I look at in the contract when I’m going over it with a professional. How do you get out of the agreement? And then what do you have to do if it ends within a certain period? In that way, the employee can know that I need to set aside this amount of money if I must pay for tail insurance or if I must pay back the signing bonus. So, they’re essential discussions, and things employees could negotiate before signing any employment agreement. Hopefully, that was helpful—kind of an overview of termination of an employment contract.
How You Can Terminate an Agreement
You probably shouldn’t, and your employment contract probably prohibits it. In any agreement, it’s going to state how you can terminate an agreement. It could be for-cause, without-cause, mutual termination, or maybe the initial term ends. But in most cases, I mean most contracts are terminated without-cause termination. Without-cause termination, either party can terminate the contract with a certain amount of notice to the other. Typically, around 30 to 90 days is a standard amount for most employment agreements. Suppose you are an employee, and for whatever reason, you don’t want to work for the employer anymore. In that case, you must follow those terms written on the without-cause termination notice.
And it always needs to be written. It’s going to state that you must write a letter. And then, it will also say if it’s a 60-day without-cause termination. The employee has to provide it 60 days prior, work it out, and after the 60 days are over. The employees are free to go once the contract terminates, and the employees are free to move on. They want to go where they want to go after that—considering if there’s a non-compete or a non-solicit. Still, we’re not going to get into that today.
How Do Employees Communicate a Notice?
The most crucial part as far as this goes is that it will be called “notice” or “notices.” It’s toward the back of the employment agreement initially provided by the company. And this will state who, then how you need to provide notice if there is communication.
An employee could provide in writing a certified letter or overnight hand delivery of whatever termination notice you’re going to provide. And that would then be considered adequate notice. Very few contracts allow email as an effective notice medium. If you gave, let’s say, you wrote an email telling your employer. I’m giving you without-cause termination notice, and I have 60 days. X will be my last day of work. I appreciate the opportunity. Well, if the email is not an effective communication medium within that notice section, that’s not considered effective notice. And then, the employer could make you work for another 60 days until you provide adequate notice. So, that’s the essential part. You need to look in the notices section and determine if the proper way to terminate the employment agreement includes email.
I can tell you if I review a hundred employment contracts, 98 of them will not include email or fax. And you certainly can’t just verbally tell your employer you’re leaving. It must be in writing. And most often, it has to be sent either by certified mail or hand-delivered. It depends on whether you work for a small practice or a vast conglomerate with locations in every state. It’ll be impossible to hand-deliver the notice if you must provide notice to the headquarters, and that’s halfway across the country.
The Consequence of Notice Not Received
To be safe for the most part, you need to write a letter. You’ll have to print it out and send it via certified mail that the employer is using. Usually, it’s one or two. You must send it to the owner if it’s a smaller practice. If it’s a big conglomerate, you have to send it to probably your boss plus the legal apartment of the company as well. If you look through, how much notice do I have to provide? And then how do I have to provide effective notice? You’ll be safe.
I have a couple of scenarios, and people have called me after the fact. And they’ll say I sent a letter to my employer’s email. I told them I was going to terminate the employment contract, and they didn’t say anything. I assumed that my contract would end on a specific date. The employer was mad about the employee leaving the company. The employer ticked off that they were leaving. So, what they did was they just sat on it for 45 days. And then, 15 days before the physician thought he was going to leave, they said, you didn’t provide us with effective notice. Email isn’t an effective form of communication to provide notice. You owe us another 60 days until you give us adequate notice, meaning a written letter sent via certified mail.
And so, the physician had already lined up another job, he had a start date in mind, and then he had to return to the new employer. He would say, I apologize; I will have to delay my start date by almost two months. That was a tough pill to swallow for the physician. If you follow the terms of the notice section, then you should be okay.
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Contract Review, Termination Issues and more!