Contracts: Why Contract

WHY CONTRACT

Lawyers are expensive, and can’t you just download a contract from Google or LegalZoom?

• Short answer: yes.

• Long answer: yes, but you’ll regret it.

There are two primary value propositions to having a competent lawyer draft your contracts, or, at least, advise you on them.

Clarity

Clarity is the most important reason to contract using a competent attorney. When business people get together to make deal, they are normally doing so because they are looking forward to the upside. Why else make a deal? However, after the deal is struck, when each side needs to perform, and time marches forward, all kinds of otherwise unanticipated problems can arise.

• How are you supposed to handle when you and your counter-party have divergent interests on those problems?

• Did you and your counter-party each think you understood the agreement when made but only find out later that your implied assumptions about the deal weren’t the same as the other party’s?

• Who bears the risk of loss in all the events that life can throw at a deal?

Lawsuits

The second, and less important, is the ability to sue or threaten to sue the other side for non-performance. This is less important because first you hope your deals never have to reach this point at all, and second because very few people actually have the stomach or funds for litigation. Litigation is a black hole of money, resources, emotion, and time. It should be avoided at all costs. However, when it’s unavoidable or you need to play a game of brinkmanship, your whole business may hinge on whether you have a well-written and well-thought out contract backing it up.