Legal funding agreements and contracts vary in their terms and conditions. That being said, there are still several key clauses that anyone pursuing aid should be aware of before entering into such agreements. The clauses we’re going to look at can have significant implications for your rights, obligations, and financial responsibilities.
Each section below will cover common terms and conditions that, when presented in bad faith, can hurt you post-lawsuit.
Bad Repayment Terms & Funding
This clause specifies the amount of funding you will receive and outlines the terms for repayment, including the repayment schedule, interest rates, and any fees associated with the funding.
Bad Recourse & Repayment Obligations
Some agreements may include clauses that specify what happens if your case is unsuccessful and you are unable to repay the funding. These clauses may outline the extent of your repayment obligations and any recourse the funding company may have, such as recourse against your settlement or recovery in the underlying legal case.
High-Interest Rates & Fees
It’s essential to carefully review the clauses related to interest rates and fees associated with the funding. Look out for hidden fees, such as origination fees, processing fees, or administrative fees, and ensure that you understand how interest is calculated and compounded.
Specific Termination & Default Details
This clause outlines the circumstances under which the agreement can be terminated and the consequences of defaulting on the agreement. Pay close attention to any provisions related to early repayment, default interest rates, and the funding company’s remedies in the event of default.
Confidentiality & Non-Disclosure Loopholes
Legal funding agreements often include clauses that require you to maintain the confidentiality of the agreement and any information shared during the funding process. Be aware of any confidentiality obligations and ensure that you understand your responsibilities regarding the protection of sensitive information.
Assignment and Transfer Red Flags
Some agreements may include clauses that allow the funding company to assign or transfer its rights and obligations under the agreement to another party. Understand the implications of such clauses and how they may affect your rights and obligations as a borrower.
Bad Indemnification & Release Clauses
Some agreements may include clauses that require you to indemnify and hold harmless the funding company from any claims, damages, or liabilities arising from your use of the funding. Understand the scope of your indemnification obligations and seek clarification if necessary.
Outside Legal Involvement
If you’re represented by an attorney in your legal proceedings, ensure that the agreement acknowledges their involvement and outlines any requirements for communication or cooperation between your attorney and the funding company.
Payment Penalties
Always pay attention to any clauses related to early repayment or prepayment penalties. Understand whether you have the option to repay the funding early and whether there are any additional costs or penalties associated with doing so.
If you enter into an agreement with harsh payment penalties, you may be on the hook for more than your total legal compensation!
Always Know What You’re Getting Into
Before signing a legal funding agreement, it’s essential to carefully review all clauses and seek clarification or legal advice if you have any questions or concerns. Make sure you fully understand your rights and obligations under the agreement and are comfortable with the terms before proceeding.
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