Friday, August 18, 2006

Five Contract Myths Debunked

When a lawyer explains how dangerous it is to draft your own contract, I'm reminded of the famous words of Mandy Rice-Davies: "Well, he would say that, wouldn't he?"

But sometimes it pays to heed these lawyerly warnings. It might save you from the legal equivalent of stumbling blindly into the middle of a mine-field. Not somewhere you want to be.

Which brings me to a recent Out-Law.com article, Debunking five myths about contracts, written by Simon Pigden, a partner in UK law firm, Pinsent Masons. Simon has a fair crack at explaining the value a lawyer adds to the contract drafting process, and highlights some of the risks you face with "lawyer-free" deal-making.


Mythbusters did NOT bust these myths

Paraphrasing, the myths are:
  1. Anyone can draft a contract, there's no magic in it.
  2. We avoid court, so we don't need no lawyer writing our contracts.
  3. We can't afford to upset the other side by challenging their contract terms.
  4. Our supplier's contract form is pretty fair – they know what it needs to say.
  5. People do deals – our contract just explains the deal.
And, paraphrasing the debunkment of said myths:
  1. Sure, anyone can draft a contract, but sometimes your contract does need to use magic words (that mean something under contract law), and most lawyers have spent time learning how to get this right.
  2. Courts are expensive places so it's great to avoid them. Having a well-drafted contract will put you in a much better position to negotiate an out-of-court settlement if things come unstuck.
  3. It's true, the weaker commercial party may want to roll over to close the deal without upsetting anyone. But why not you get your lawyer to play bad cop if it gets you a better deal?
  4. Maybe the other side do have a fair contract, but not always. When it comes to allocating risk, chances are their contract will allocate the risk to you.
  5. People may well do the deals, but if things turn sour and you end up in court, the words of the contract will shape the outcome.
You may not need a lawyer to draft every deal. But if the stakes or risks are high, it's probably a good idea.

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