I saw this link http://bit.ly/dnGAi1 regarding what Conan O’Brien is allowed to say at the Emmy’s on Sunday and it made me think about how many times I have to help resolve a contract dispute because the parties never actually read the contract. Oh sure, if you talk to someone about how to handle their contracts they adamantly swear that they read them. Fact is, most people scan a contract before signing and very few people actually take the time to understand it.
Example: I was contacted by someone last week looking for some ideas. As you may know, my practice is founded on the idea of getting things done and sometimes that takes ideas. They are trying to buy a business. Both sides have hired attorneys for the due diligence and everything checks out. Sweet. Let’s close. Wait, hold on. What’s this? The seller signed a long-term lease for the business space. Everything in the lease was normal except a provision in the agreement that requires the seller to pay the property owner 10% of the selling price if the seller sells the business during the lease period. Seriously. Hey, kudos for the landlord for going for this provision in the lease. Changing tenants can cause problems for landlords. I get this. But I have to ask how the seller did not see this in the contract, and how did multiple attorneys miss this during due diligence? The seller found his selling point without this 10% payment and the buyer isn’t going to tack on an additional 10% to their offer. This deal may be dead in the water. I do have some ideas but this post isn’t about that. This is about reading!
Why don’t people take the time to read? I don’t know. I suspect that there are several reasons. One could be that contracts can be hard to read. There are business attorneys who like to overwork their language. Plain English (or whatever the appropriate native tongue should be) works better my friends. Always. No exceptions. Contracts almost always repeat themselves several times. I don’t mean that they literally repeat the words, but that they can repeat the same restriction or clause and then have a new modification to it. This invites the reader to see the repetition, skim it and miss the new bit. This practice has good intentions. They want the reader to see the clause again so as not to miss it. In practice, it can backfire.
Another could be because people are afraid to ask questions and embarrass themselves. Have you heard the expression that it is better to keep one’s mouth shut and be thought the fool than to open one’s mouth and remove all doubt? This adage never applies to contracts, negotiations or any communication with a prospective business relationship. Ever. I know that it can be a blow to the ego to ask a question. It can be a far worse blow if you have to weather an unnecessary storm because you didn’t understand the agreement. I ask questions all the time. All. The. Time. I do this because I don’t want to assume that I know what the other party thinks a certain provision means. It may seem straightforward to me, and it probably does to them too. That doesn’t mean we take away the same meaning. Meanings can be expensive. In addition, if the contract is ambiguous, you may need these specific statements later.
I’m sure there are many other reasons, but I couldn’t possible come up with a comprehensive list. How do you protect yourself? Read and understand the contract. Ask questions. Hire an attorney, preferably me. Just saying. Whatever you do, do not leave the proverbial table without knowing that every party to the agreement is in complete agreement as to the terms and conditions of the contract. Heck, even then you may still have a dispute, but hopefully you will have a good basis for resolving any disputes without the need for more business lawyers. Except me, of course.
