As I am writing this post, always consider cost/benefit analysis. If the cost of the review is not in line with the liability or benefit of the contract, then it is up to you as to whether the cost of the review justifies the cost of having an attorney review it. Notice that I mentioned benefit and liability. Contracts are a two-way street. What may look like a wonderful opportunity may be laden with hidden pitfalls. Further, these pitfalls are based upon performance or nonperformance issues that were included in the contract, but really something that was not anticipated.
Disparity Between the Contracting Parties
In the ideal world, the contracting parties are on an equal footing. However, in today’s business world, this is usually never the case. One party will have a stronger position than the other. This is true for any activity such as hiring a contractor for home repair or purchasing a franchise. In both cases one side conducts the activity as part of its daily operations, while the other party may only interact with the documents/contracts associated with the transaction a couple of times in their lives. The terms, acronyms, insurance requirements, performance obligations, liquidated damages provisions, costs, terms for default and breach, attorney fees, arbitration provisions or other settlement requirements… is endless, overwhelming, and unfamiliar.
The party that prepares the contract is setting forth the terms. They set the agenda and, because they have done this before, they know where the pitfalls are. What happens if there is a supply-chain issue, a worker shortage, Force Majeure, does the contractor have a remedy. Is the remedy nonperformance and a forfeiture of a deposit as liquidated damages for contractually stated unforeseen circumstances. What about an installment contract that is front loaded with payments? If you are the customer counting on the final performance to complete a project, is it better to be holding 5% of the funds or 25% of the funds? Disparity contracts will usually be front loaded.
What can be done in these circumstances where there is such a disparity? First, if it does not look good, DO NOT SIGN IT! Contract representatives will use soft and hard sell practices to get a contract executed. Verbal statements like: “That is just standard language.” Or “We put that in all of our contracts, but we never do that.” Or “We wouldn’t be where we are today if we did that to our customers.” If any of that is true, then request the contract representative to remove the questionable language. Verbal statements concerning a written contract do not hold up well, especially when within the contract it states that all their terms between the parties are reflected in the contract and any changes to the terms of the contract must be in writing.
As I dawdle on, bear in mind that there are other contractual mechanisms subtly pressing upon the disparate party. The use of cross references within long contracts, referencing definitions, exceptions, and exemptions can make otherwise clear language extremely confusing. For example, homeowner’s insurance policies are typically fraught with a myriad of exceptions, exemptions and definitions that limit coverage. This coupled with the Sominex factor (length, legalese, and font of a contract too difficult to focus on for more than 15 minutes) can wear-down the most impressive business professionals. This is intentional and the devil is in the details, which in this case means, do not blind sign. Get a lawyer to review it first.
If you need help in drafting, reviewing, or have a dispute concerning a contract matter, please give me a call.
I appreciate you taking the time to read this post. I am thinking about writing more posts concerning issues with contracts. I hope this helped. Thank you!
