The contract seems like a relatively straightforward business mechanism: you put down what both parties duties are and then you sign it. Seems simple, or is it?
Let’s look at this simple contract statement: “Farmer agrees to sell 10 cows to Buyer for $1000.00.” That seems cut and dry. There is one obvious problem in the eyes of this contract attorney. The term “cows” is ambiguous. Are these young cows, old cows, brown cows, black cows, big cows, small cows, female cows, or male cows? There will be no problems if the 10 cows are delivered and they are what the buyer wanted but if they are not then there is a real problem because of the ambiguity of the term “cows”. Ensuring that the contract matches exactly what the parties agree to is important so the wording of the document needs to reflect that.
Contract law gets even more complicated. Certain contracts need to be in writing to be enforceable and some actions can constitute a contract regardless of if there is a writing or not. Enforceability of terms of a contract can be waived if not enforced within a reasonable time and rights can be given away if the contract is agreed to.
To even more complicate things Michigan has adopted the Unified Commercial Code (“UCC”) that regulates the sale of goods. Going back to our cow scenario, what happens if the contract for the sale is signed and 2 of the cows die while being delivered to the buyer? Is the farmer or the buyer responsible for the delivery of the cows? These are terms that need to be included in the contract. If not you are at the mercy of the UCC. The UCC covers everything from contracting to warranties to breach and so much more.
The question is often posed to me of why having an attorney draft or review your contracts is important. That answer is a contract establishes the rules that your business and other parties are going to follow. Whether it is a contract for the sale of cows or the supplying of raw materials or for the sale of the entire business or the construction of a new building, those rules are important. It is important that you are clear on what is expected of you and it is important that you have a written instrument that is clear on what you expect of that third party. A competent business attorney can ensure that the contract you are executing aligns with your expectations and protects your rights.
I often compare a contract to insurance. 9 times out of 10 that contact will sit in the filing cabinet and gather dust. But it is important that the contract is on point for that other time. That is the time that you have a disgruntled customer or your supplier didn’t follow through with his delivery or a full payment was not received. If the contract is complete, you have the insurance that you will be made complete or will avoid liability. If the contract is not complete, then there are no guarantees if that situation can resolved in your favor. Chances are that you won’t have to use your homeowners insurance but you don’t want to take the risk. The same thing should apply to your businesses contracts.