A verbose lawyer is dangerous.
Some attorneys seem to believe they are paid by the word and that job security stems from developing texts indecipherable to the layman. The reality is that long sentences in contracts can bite you.
Take a “simple” agreement between a telecom operator and a company that owned utility poles. Within the 14-page contract, they agreed that “This agreement shall be effective from the date it is made and shall continue in force for a period of five (5) years from the date it is made, and thereafter for successive five (5) year terms, unless and until terminated by one year prior notice in writing by either party. ” Sure, it was longer than a sentence that a normal person would write but because lawyers were involved, people assumed that longer sentences must be more
After signing the agreement, the telecom company thought the utility pole owner was bound by the agreement for a minimum of five years. Thus, the telecom company expended large amounts to augment its phone and cable services across 91,000 of the company’s utility poles. Unfortunately for the telecom company, the utility pole company interpreted the run-on sentence differently. The utility pole owner believed that the right to “terminate by one-year prior notice” applied at all times -- even before the renewal period.
The resulting court battle cost more than $1 million. It would have been so much simpler to break that long sentence into two separate shorter sentences. And perhaps include a simple illustrative table showing the possible options.
If you cannot understand what your lawyers wrote, then the other side might not understand either. Avoid major legal expenses by aiming for clarity upfront.
Don't lose your mountain.
A major ski resort was finally making huge profits. Many years ago, it bought the rights to use a particular mountain for what seemed like an astronomical annual sum. The popularity of the resort grew dramatically over the years bringing solid profitability to the resort operator. That lasted until a letter entitled EVICTION NOTICE arrived in the mail. It turned out that the resort operator had failed to exercise its right to a 20-year lease renewal at the bargain basement price of $155,000 per year. A competing resort operator swooped in and paid over $180 million to take over the lease.
It’s not surprising that prices go up after we have locked in a good deal. Knowing your contracts and what is required to extend and renew them prevents you from forfeiting these bargains.
Real insurance requires more than a promise.
Businesses rely on vendors and agents for so many operations -- ranging from debt collection to marketing assistance to package delivery. Often vendors and suppliers are small competent businesses that don’t have deep pockets. These vendors and suppliers are acting as our agents 2 in some small corner of the world and certain legal principles (such as respondeat superior) suggest that we are responsible for their behavior when they act on our behalf.
To ensure we do not end up bearing the risk that these vendors and suppliers err, we often require them to have insurance. But how often do we check that the insurance is truly present? Promised insurance provides no risk protection at all if has not been truly bound.
Make a note of which of your business partners, vendors, and suppliers are supposed to carry insurance. When is the last time you actually procured their Certificate of Insurance or read their policy to ensure it covers you too?
Compliance risks roll downhill.
Regulators are always looking to extend their control, however they are fighting against the entropy of outsourcing and contracting that comprise the modern corporate ecosystem. To fight disaggregation of work, they expect to see regulatory requirements enforced against subcontractors, vendors, customers, and partners.
Be on top of your business agreements. Have you agreed to be HIPAA-compliant? Or follow TILA disclosures? Scan your business agreements for acronyms and legal references and ask your counterparties what they really expect to comply with these laws -- before the regulators show up at your doorstep.
Employees are not as permanent as we wish.
We all have those walking dictionaries who know the history of certain business relationships. But growing businesses cannot rely on them. The median employee tenure is 4.6 years which 3 means that odds are high the instigator of a multi-year relationship will not be around when it is time to consider renewing, terminating, or sorting out relationship difficulties. When disputes occur or key dates arise, we don’t have time to look for contracts and amendments and supporting documents. Gathering and storing key documents can be done in just a few minutes
per day if one plans ahead.
What We Do at Contract Wrangler
We are contract nerd attorneys, software engineers, and data scientists. We live and breathe for
the opportunity to help you uncover ways hidden opportunities in your contracts to boost your
revenue. Drop us a note about your business and let’s see how we can help.