Contracts are a necessary element of business. They form the relationships and set the expectations on which we all rely as businesspeople. But, at the end of the day, a contract is nothing more than a promise. And a promise, as we all know, is only as good as the person who makes it.
When you enter into a contract, therefore, you have to consider two important things:
First, what is the quality of the actual contract? For example, does it clearly and unambiguously set forth what each party is supposed to do, and what happens if they don’t? Does it provide reasonable grounds for termination of the agreement is not working out, but still ensure that each side gets the benefit of their bargain.
Second, what is the quality of the person on the other side of the contract? Is this a person who will keep his promises? After all, if he doesn’t, all the contract allows for is me to seek a remedy, usually by going to court. All too often, that is not really a remedy at all, given the expense involved and the likelihood that the court can even provide the relief you need.
In my practice, I am often called upon to review a business contract (or, as the case may be, a commercial lease, which is nothing more than a specific type of contract) after the relationship has soured, a dispute has arisen, and a business owner comes into my office asking what he or she can do. In many of these instances, the contract involved either contains ambiguous or unfavorable terms, or is missing important terms altogether. The counterparty to the contract is either using terms that were put into the contract to bludgeon my client, or taking advantage of the absence of terms to run roughshod over him.
More frequently than I care to mention, when that business owner is sitting in my office, it is the first time a lawyer has even looked at the contract. The opportunity to prepare a solid, comprehensive, clearly worded contract is long past – and now the only thing we can do is try to reach a negotiated resolution to the dispute (if that’s even possible), or litigate it. In either instance, the expense involved is far greater than it would have been to do it right in the first instance.
Humans are fallible, imperfect beings. And business, as is life, is unpredictable. Try as you might, you will never be able to predict with 100% accuracy who will keep their promises and who won’t, and what relationships will work out and which ones won’t. What you can do, however, is take control of those things you can. And one thing you can do is prepare rock solid contracts, and do so right from the beginning.