Have you ever read the last half of any contract prepared by a lawyer? You know, the fine print that you SKIP over. It all just seems like worthless, generic, page-filling ink blots. Most lawyers get paid by the hour, but some of these contracts make it seem like they’re getting paid by how many words they write. These fine print contract paragraphs can be long or short, have unknown or common terminology, and are almost always towards the end of the contract. So they can’t be that important, right?
WRONG, BIG TIME WRONG, WRONG 10 TIMES OVER.
This is America. Land of the free and home of the brave. And also home to what is perhaps the most complex, confusing, and convoluted legal system the world has ever seen. When an attorney drafts a contract, they don’t draft it to serve their client for only one day, but rather they write it to serve their client on any future day of possible despair. And unfortunately, these days of despair are becoming more and more common.
So what are these paragraphs of fine print really about, and why are they so important? Let’s take a look at some of the common ones:
1. Forum Selection or Venue
When having a contract drafted, it’s common to select where any potential future disputes will be discussed, litigated and decided. Your attorney will almost always pick a state that you are comfortable with, either based on your residence or the location of your business operations. For example, if you are a resident of and operate in California, but you are entering into a business transaction with another party based in New York, your attorney would push for California to be listed as your “forum” or “venue”. Don’t just agree to a “forum” or “venue” where the other party is located. In the event of a dispute, you will be thankful to have some semblance of a homebase which you are comfortable working from, rather than facing major logistical issues such as booking travel and lodging, and finding qualified attorneys and available courts in the area. This may be difficult if the other party is a much larger company, or if you are in need of their services, as opposed to them being in need of yours. The bottom line is do not settle for an out-of-state venue if you do not have to.
2. Dispute Resolution
Beware of mandated Alternative Dispute Resolution (ADR) options that you are not comfortable with. Some lawyers draft contracts that mandate a dispute be remedied through mediation or arbitration, instead of in court. While these approaches are usually confidential in nature, they mandate that your dispute be heard and decided by an arbiter or other judicial referee. This takes away your right to have the dispute heard in a courtroom and decided by a judge or jury. Depending on the nature of your case, it may be advantageous for you to have your case be heard publicly, as opposed to being deliberated and decided in private.
3. Attorneys’ Fees
Whenever a prospective client brings me a possible breach of contract claim, one of the first parts of the contract I look at is if it contains an attorneys’ fees clause. This provision can be something as simple as the following:
“If legal action is instituted to enforce any of the provisions of this Agreement, the prevailing party shall be entitled to reasonable costs and attorneys’ fees.”
Confusing, right? In a nutshell, this clause means that the winning party gets their legal fees paid by the losing party. Absent this clause, many parties face the unfavorable reality of succeeding in court, either by obtaining a judgement in their favor or successfully defending themselves, only to find that they have no recourse to seek reimbursement for the money they spent on attorneys and legal representation. By having an attorneys’ fees provision in your contract, not only can you seek reimbursement from the losing party for any money you spent on attorney’s fees, but you can also avoid being dragged into court for a baseless and meritless claim.
4. Entire Agreement
Many transaction and business agreements contain a clause which states the agreement is the only one between the parties, and any other agreement, term, or representation not in the contract is null and void. If you have a written agreement with someone that includes this clause, you will be unable to enforce any separate terms you had previously agreed upon, such as an oral agreement or handshake deal that never made it into the written contract. I see this frequently when someone prepares their own contract based off of a template or sample they find online. They often assume that their separate agreement, often referred to as a “gentlemen’s agreement”, is still valid, even though it was agreed upon previously, outside of that contract, and was never incorporated into the written agreement. Often times, business relations go sour because a gentlemen’s agreement wasn’t honored. Without amending the written contract to make the terms of a separate oral agreement or handshake deal binding, this gentlemen’s agreement would be unenforceable due to the “Entire Agreement” provision in the written contract.
Contract law is a never-ending rollercoaster of varying interpretations and unpredictable ambiguity. Because of the intricacies and obscurity of language that is often found in written agreements, it is highly recommended to consult an attorney who specializes in business and contractual law when going through this process.
When you are looking for experienced, ethical and efficient legal services, contact the Morrar Law Office.
Tawfiq Morrar is an attorney in Elk Grove, California who handles all aspects of business and transactional law, in addition to estate planning services. Mr. Morrar can be reached at (916) 968-7973 or via email at tjmorrar@morrarlaw.com.
