Contracts Law Basics & Best Practices (Free Preview)

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Free Preview: Contracts Law Basics & Best Practices [Transcription]

To me this is one of the most important parts of this presentation, for the terms of every contract you want to enter into and have negotiated to be clearly and accurately reduced to paper and completely understood by the parties. How do you work with your in-house or outside counsel to accomplish this? Be it on a single contract or format for a type of deal you regularly enter into. Insist on clarity, clarity avoids controversy. You can accomplish this by learning to recognize the types of language and contracts that obliterates clarity, that builds in disagreements and misunderstandings about what the purpose of the contract or deal is and can kill that deal and put your company and you in court.

To me a contract’s primary objective is to be a clear set of instructions where the parties are on the same page about its subject matter and the rights and obligations under it. This enables them to work in tandem towards achieving their mutual goals and that deal. Such as substantial profits, creating developing and monetizing a brand or something culturally unique or significant. Clarity also enables the parties to refer to the contract if a difference of opinion or dispute arises over it and resolve it based on what it says in the contract. Without this clarity their deal is doomed from the start and mutually successful commerce instead becomes the party’s arguing over the contract’s interpretation often with only their litigators benefiting.

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In-house counsel who write contracts and outside counsel also they don’t intend that they fail or only create disagreement or distrust yet that is often exactly what happens. Why? A little background on this might be helpful and there are several reasons. This is how we are taught to write contracts in law school. Cases, laws, even the constitution of the united states are replete with legalese which is archaen jargon that doesn’t reflect common plain English. There is also some degree of reticence or laziness in revising contract formats. I’ve had push back from lawyers only presentation of this material and also when I have negotiated contracts. Some lawyers have actually said that a contract is or should be written for the judge not for the parties. I think that’s crazy and just flat wrong.

Also a lot of lawyers believe that legalese gives more gravitas to the contracts and to other legal documents making them more persuasive and enforceable. The theory is if it sounds legal it is. Often they are afraid if they don’t use legalese their contracts will be less precise instead of more precise. Don’t get me wrong I was as guilty of using legalese and other imprecision and contracts as any other lawyer but those many years I spent as a contract dispute and IP litigator showed me what can and does go wrong with contracts and how to prevent it. This is what I want to share with you today.

Unfortunately many attorneys and the parties often think that reducing the agreed to deal or business relationship to writing is a cursory step in formalizing the business relationship. Yet the manner in which those concepts and details are expressed on the page is more important than the concepts themselves. What’s the fix? I’m going to suggest specific ways of having concepts, terms and conditions expressed in written contracts by you and counsel that clearly and precisely state what you and the other contracting party want and expect from each other.

By doing this the contract serves the purpose for which it was created, parties working in tandem to achieve their stated mutual goals in making that deal not winding up in disputes and in court. The ways to accomplish this are by having the contract written in plain common English, having it written concisely so that is comprehensible by all involved not just the lawyers. This all in turn makes the contract as bullet proof as possible and this is better than attempting to address an issue after a conflict arises when the parties don’t have the full cooperation of each other and the people around them and the other side will likely have their own or a different agenda than yours.

Now in dealing with your counsel on this don’t try to educate them, you’ll likely get push back after all they are lawyers and you’re likely not. They’ve been using the same format and language for years if not longer and change scares some people and it is hard for them. Also they may not have the time or want to take the time to recreate a wheel they feel rolls just fine or at least most of the time. When dealing with counsel on these issues be collaborative with them, be subjective but firm. I tell clients don’t forget that lawyers work for you, you don’t work for them.

As I mentioned before legalese is a centuries-old jargon that is still a common place phraseology in contracts and laws today. It’s archaic, useless and redundant and the single biggest reason contracts wind up in court and deals fail. Also it’s a dangerous trap, legalese causes the reader to glaze over it as it’s often understood as relevant or expected legalese. If a party wants to break a contract they often rely on it’s legalese as the basis for claiming a lack of understanding of breach or for abandoning their obligations. Legalese leads to impersonation which leads ambiguity and gives a party a way out if they are looking for one. It’s also an incentive to bad behavior and makes it much easier to break a deal.

Litigators far outnumber transactional lawyers in the U.S for a reason, that’s because there are two interpretations of a word or phrase in a document. However, there should only be one where contracts are involved, the one the parties intended by their choice of those words or phrases. Here is the most common legalese in contracts I’m sure you have all seen this language a million times in contracts you’ve read and signed.

I’m going to show you some examples of actual contract language that was written by experienced lawyers from contracts I’ve recently read or been sent. I’ve highlighted the vague or unnecessary terms. Are your eyes glazing over like mine? All of this is vague, confusing hard to understand and I’m not sure what it even says. Not only that but who talks like this.

The one on this slide is a particular favorite of mine, is it or isn’t it a contract. Shall is probably the most misused and over used phrase of legalese. Most lawyers believe it means mandatory, not only doesn’t it mean mandatory but it has at least four definitions in Black’s Law Dictionary which is the first law book a law student acquires. It means has a duty to, is required to, it means may, it means is entitled to and it also means will as a future tense verb. The corporation shall then have a period of 30 days to object is an example.

One key to an effective and force able contracts is simple declarative sentences that precisely delineate the parties rights obligations and duties. Here are some alternate clearer ways to state common contract verbiage that is often stated in legalese. The reason for the fourth one has a duty to is that a duty is a clear unequivocal and current obligation. Another legalese phrase that should be avoided at all costs is deemed. That’s because it can be interpreted as equivocal, that is that some condition or event has to be satisfied in order for something to then be deemed whatever it is. If the contract says that something is it is, it’s unnecessary and redundant to deem it so.

Here’s another category of contract killers, vague, imprecise and unenforceable language. How can the parties have successful commerce under a contract when they disagree about or can’t tell what the contract says. Again, here are some quotes from contracts that I’ve been sent. What are these phrases supposed to mean exactly? That other agreed to contract provisions aren’t agreed to as strongly. Does that party need to re-agree to a particular provision despite agreeing to everything in the contract by signing it. Does agreement to that specific provision need to be reinforced? Also what is the effect of these re-agreement phrases on the contract’s other material terms and conditions? Why only re-agree to some of them? Why re-agree at all to what’s already agreed? All of these phrases do is create ambiguity and potential issues.

The take away here is that the phrases agree and agreed don’t belong in the body of a contract, there’s only two places where I think they should be used in a contract. One is at the end of the recitals in the contracts that have recitals at the beginning of the contract, I’ll discuss recitals in a little more detail later in this presentation. The other is to describe how the parties will handle something in the future, an example of that is the parties will agree to the form and the sit-us of the energy to be formed in good faith. An example of the use with recitals would be based on the above which would be the recitals the parties agree as follows. Here are some suggested solutions and by the way the reason final is boded and capitalized is because I’m using it is a defined term which will be discussed in more detail later in this presentation.

The last one on this slide is for the purpose that if a particular contract provision has some special significance, make that provision of material condition of something else in the contract or a material inducement for the other side entering into the contract. The example here is if a company is retaining a supposed expert, language like this that says and verifies that person has that level of expertise and experience and the company is relying on it entering into the contract serves that purpose.

The next category of vague or imprecise terms to avoid are unenforceable and meaningless phrases. Here’s a couple again from actual contracts I’ve received. How exactly do the parties or a court or arbitrator measure the highest level of integrity and professionalism or good faith and reasonable efforts, let alone conform to them? Instead use a term of art in relevant industry that the parties will understand and accept as a standard of measuring device. Here are two examples from media agreements that I have written. Almost every industry has these or some custom and usage who’s meanings is universally understood in that industry.

ExecSense Speaker

Paul Menes
Co-Head of Entertainment and Digital Media, ADLI Law Group P.C.
Contracts Law


Paul I. Menes is the AV-rated (Preeminent) Co-Head of Entertainment and Media at ADLI Law Group P.C. He provides “Creative Law for Creative Endeavors”, to select clients in North America, Europe, Japan and Australia.

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Bringing his unique background, philosophy, and over 30 years’ experience to our practice, Paul is not just a transactional lawyer—he’s a business lawyer. He’s always focused on his clients’ overall, long term objectives, not just on the individual transactions or matters that are only a part of them. Paul has always represented clients in many facets of an industry. He has a global view and unique understanding of how all the moving parts of a deal need to interact for a client to be successful in it and how to structure, write and negotiate deals accordingly.

Prior to joining ADLI Law Group P.C., Paul was principal attorney at his own practice, Menes Entertainment and Media Law, as well as a name partner or principal in other firms.

Paul is a member of the California, Los Angeles County, and Beverly Hills Bar Associations, and speaks, writes and is interviewed or quoted often. Examples include Entertainment Law and Finance, The Financial Times, MUSEXPO, L.A. Times, Associated Press, Digital Music News, and several law schools, legal and business conferences.

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