Previously we discussed the importance of contracts for a business. So you are an extremely well educated, intelligent entrepreneur. You have read the contract that was presented to you and the language seems pretty straight forward. That means you understand it and don’t need to hire an attorney, right? Not so fast.
Contracts are more complex than just understanding what the language means. Business attorneys in previous generations used complex legalese in drafting contracts that needed to explained to clients. In more recent generations, plain language has become much more commonplace. It is expected that everyone can read the language contained in a contract and understand what is contained in the document. But that does not necessarily mean you understand the contract or that your rights are fully protected.
Understanding a contract is something that a business law attorney has spent years training to do. Contracts are part of their expertise and being able to see things that you might not can mean the success or failure of your business. Let’s look at a classic example. A contract might contain language that states that someone will buy a farmer’s corn for $3 a bushel for a term of 5 years. The farmer might understand the entire contract and think it’s a great deal because now he has a guarantee sale of all of his corn for the next 5 years. What happens though when in year 2 of the contract corn goes up to $5 or $6 a bushel? Now the farmer is only getting about half as much as he should be for his corn. The farmer understood the language but he didn’t understand what the terms would mean for his ongoing business. A skilled attorney would point out that the term regarding the $3 per bushel should probably be changed from a set price to an adjustable price based on the market in any given year.
The other consequence of playing lawyer for yourself is while you might understand the language contained in the contract that does not mean you know what language is not in the contract that should be. A contract is meant to protect you and your business. If the contract does not have all the language that is necessary to do that or does not foresee possible situations that might arise then you are left unprotected. Separation agreements should have confidentiality clauses even though you do not think your former employee would ever give up your secrets. Your contract with a vendor that delivers raw materials every month should have a waiver clause so when there are variations in one month’s delivery and you accept the following month you have not given up rights.
Contracts are important in operating a business. They protect your rights by setting out the rules of the relationship between you and your employees, customers, clients, vendors, suppliers, landlord, etc. Understanding if a contract fully protects your business is more than just knowing what words in the contract mean. It also involves understanding the ongoing effects and what language is not in the contract. An attorney that is experienced in business contract law will be able to quickly and efficiently review and revise a contract so that you are fully protected.