Contract Insights
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.
What’s a Contract
This seems like such a basic question. Who doesn’t know what a contract is? However, much like all of legal, the answer is not so simple.
A contract has nothing to do with a signature. It doesn’t even have anything to do with a writing. The formal definition of a “contract” is “a legally enforceable agreement.” Sadly, this just opens the door to “what makes and agreement legally enforceable?”
Three things make an agreement enforceable:
Offer
Acceptance
Consideration
Takeaway/Client Notes
We will be giving each of the above three things their own blog posts, but some key takeaways are:
The first is that you can implicitly make an offer, and you can implicitly accept an offer through conduct. This might mean paying someone or doing something you wouldn’t have otherwise done, but for the agreement between you and someone else.
The second is sometimes you might enter into an agreement with no consideration. No consideration, no contract, even if an attorney prepared the document and everyone signed it. Consideration is hard to explain in one sentence, but it basically means that in order for someone else to bind you to something, you need to be giving them something they want, which you otherwise wouldn’t do in exchange. So, if someone makes you sign a one way NDA and you get no benefit from it, then you’re probably not bound to that NDA.