More On Saying What You Mean

OK. They have not told me to stop, so I take up my quill, again. Last month we talked about why Realtors and Lawyers should not start with a form, fill in the blanks, and ship it out to do its business. That form will be a child in an adult world.

One of last month’s examples of misuse of a legal form was the preprinted provision that the written agreement is complete, when clearly it is not. That statement is actually included in most forms, and it disserves the person using it if the deal is based on financial information that the Buyer is relying on to establish the value of his purchase, if that information is not attached or included. The historical information is important. Another example of that is a contract to buy a custom computer system or software package. If I purchase a specific software package because it will do a job that I describe to the salesman, I want my description of what I said to him, and he said to me, included in that contract. Then if it doesn’t do what he said, I want some ground to scream “foul”.

Let’s look at another example of pre-printed form practice. Every form has in it a sentence that says something like” if any part of this contract is found unenforceable or void by any court, that part will be disregarded and the balance of the agreement will be controlling and enforceable against the parties”. Again, Really? What if the thing that’s illegal is the consideration to one of the parties? For instance, we stipulated that the delivery date for goods will be “on or before the 15th of December.” If that date were nullified or missed, do the parties want to go ahead as if that date was omitted? What if my store is a Hallmark store and my sales happen before Christmas? A big delivery of Christmas inventory received in my store in January would be economic disaster for my store if I had to pay for the delivery when received. Wouldn’t it be better to say in the agreement words to the effect that, “if any part of this contract is unenforceable or not performed for any reason, a court will have discretion to affect the intent of the parties by substitute performance if possible or by voiding the agreement?” If you were that purchaser, wouldn’t you want your lawyer to change the form?

Often, form contracts call for arbitration in the event of default. Every fat cat in America knows that arbitration works only for fat cats, not for little guys. After all, the salaries of judges, are already paid, and there is no arbitration that would cost less than several thousand dollars. There are exceptions to my advice not to arbitrate, but none worth mentioning in this article. The fat cat also knows that he can load the probabilities for success even more if he can require his own industry arbitrator. A great example is FINRA, the organization of securities dealers responsible for all securities violation arbitrations. Those arbitrations work wonderfully. But only if you are the industry and you don’t mind spending thousands of dollars to hire your own judges, who magically arbitrate favorably to the industry. The pre-printed form is only the friend of the guy doing the printing.

The purpose here is to say that it matters who writes your contract, because the forms don’t always serve you well. Expect your lawyer to want to understand the deal, and to ask you questions that go beyond the form. That will likely cost you more than blind acceptance of someone else’s form. But generally the cost will be a small fraction of the disaster it might prevent. A careful lawyer (or real estate agent) is your best friend.