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The Faux Contradiction of Contracts

Just the other day, I picked up my daughter from school. She announced to myself and my other daughter in the car at the time, that she “made friends with students IN Los Lunas.” Now, we are in Albuquerque, and Los Lunas is a 45-minute drive, and I knew my daughter was not in Los Lunas that day. Even though I knew what my daughter meant, I corrected her saying, “Honey, you made friends FROM Los Lunas, not IN Los Lunas.”

This turned into a small discussion with my daughters on what’s the difference between “IN” and “FROM,” and why it matters.

This was such an interesting discussion to me, as an attorney.

Why does it matter whether we use the word “IN” or “FROM” in a sentence? Interestingly, such a word would not be flagged as a spelling error or grammar error in a word processor. Such a word may be completely skipped over in a rush or hurry or by a non-attorney not trained in sniffing out trouble. Such a problem is exactly the type of thing that gets two parties into a disagreement, when one party thought performance was based IN something, and the other party thought performance was based FROM something.

It reminds me of contracts.

Contracts are often FULL of jargon. Without the expert view of an attorney, any business owner can get themselves into a lot of trouble.

Not surprisingly, many business owners and leaders disdain contracts. They are full of arcane jargon, and they know if they aren’t careful, they can get themselves (or their businesses) in trouble. As a consequence, many business leaders view contracts as a contradiction: They want it done quickly and cheaply, but want it to fully protect them.

Yet, we have all sorts of problems that can creep up in a contract that aren’t obvious or won’t be flagged by a word processor’s spelling and grammar check. Even without legal training, the words “IN” and “FROM” could have profound impacts on how performance is spelled out in a contract. Without legal training, however, there are all sorts of issues with words that bode serious pitfalls for the uninitiated: “assignment with novation,” “work for hire,” “for cause,” “represents and warrants,” versus their corresponding opposites, such as “assignment,” not saying “work for hire,” “without cause,” and “states.” And, this is just the tip of the iceberg.

Getting your contract reviewed before you sign it will be viewed as a wise investment.

The truth of the matter is, if a relationship goes swimmingly, the parties get along, money is made, trust is maintained, etc, no one will ever look at the contract. Money spent with a lawyer or law firm reviewing and perfecting the contract will be viewed as “wasted.” Conversely, if the relationship fails, the parties fight, money is lost, trust is lost, etc, everyone will look at the contract, and worse, every word, comma, semi-colon, date, dollar amount and computation will be carefully examined, scrutinized and debated. And, the more money spent with a lawyer or law firm on getting the contract properly reviewed and perfected will be viewed as a wise investment.

Therein lies the perceived contradiction of contracts. But, it’s a false contradiction. Contracts are simply a tool to manage risk, and you spend appropriately to manage and balance your risk. It’s like insurance. Insurance isn’t viewed as a contradiction, because most business leaders understand the role and purpose of insurance. A contract should be viewed under a similar lens, and when you do, you realize the perceived contradiction is false. Instead, view a contract as a means to manage financial or legal risk, and you then spend according to that risk.

Law 4 Small Business’ services include a $20/page flat-rate contract review.

For example, if you’re a million-dollar retail outlet, and you want to hire a vendor to keep you well-stocked of bottled water. The failure of this relationship is probably not very important to your business (unless this is exorbitantly expensive water or it dominates your retail revenue), so you probably wouldn’t spend a lot of effort or resources reviewing the contract (but you should still quickly review it!). Conversely, if you’re a million-dollar business that depends on getting paid from your clients, and if your clients stopped paying you you’d be out of business … you’d be foolish not to have invested in a carefully prepared services agreement for your customers. Contracts manage risk.

That’s why our $20/page flat-rate contract review is so popular. It’s available to those savvy business leaders who recognize an attorney review of a contract helps them manage risk in the direction they need, with an extra set of eyes to catch misplaced words such as IN and FROM.

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