This past weekend I visited the Zoo. Looking at all of these animals separated from the crowds, in some cases to product the crowds from the animal (black bear/lions/vipers) and in other cases to protect the animal from the crowds. The separation prevented me from going in and it prevented them from going out. Are the animals in a cage or are the crowds? Depends somewhat on your perspective.
We’ve all heard that good fences make good neighbors. But putting your neighbor in a cage usually doesn’t turn out so well. It seems to me that the difference is one of perspective.
Fences delineate boundaries, cages indicate control. Fences strive toward a common understanding, cages strive for self protection. Fences are open, cages are closed.
Often times when we are negotiating legal contracts we start out by striving to create fences. Statements that lead to a mutual understanding of expectations. Done right, these contracts are beneficial to the relationship as they add clarity; however, it is very easy in these kind of negotiations to begin to strive for self-protection and built a cage around the other party.
This is when perspective shifts and with deleterious consequences. Rather than working toward mutual clarity, each is now competing before the relationship has even begun. And since control and trust are inversely correlated, this ultimately breaks down trust which is fundamental to having a synergistic relationship – which is usually the whole reason you started to write a contract to begin with.
Clarifying the business relationship is only part of the purpose of good contracts. Another purpose is to address the worst case scenario and provide some means of resolution while everyone is still getting along. Presumably, if things go sour, it will be much more difficult to resolve the conflict then because of pride, emotions, etc. However, if a contract addresses those circumstances there is then an objective document governing the relationship, that, with the support of the courts, prevents the unnecessary expenditure of precious dollars later when decisions are made on a more emotional basis.
However, because of the unfortunate complexity of modern jurisprudence sometimes the “words” in a contract don’t necessarily mean always what they appear to say. There are some good movements to make contracts more plain, but it takes some expertise and an understanding of both the legal and business aspects of the transaction.
My point: Contracts can be very useful in not only governing a relationship but salvaging that relationship later if something goes south. But a contract is only as good as the paper it is written upon…and often, a poorly crafted and unclear contract can do more harm than good. Particularly if one party chooses to take a dishonest approach to its interpretation.
Which is why there is value in making the investment in a good business-minded lawyer at the outset to make sure the contract effectively captures the intent of the parties. Those same lawyers can also act as “mediators” thin the discussions to prevent the business parties from “competing” or becoming “adversarial” as you suggest.
I’m glad that you had time to comment on this as I was interested in your perspective. It’s always good to get a lawyer’s opinion (even of your blog posts 🙂 ).
There is no doubt that making sure a contract is legit and complete is worth having a lawyers review and you’re right that a contract can be used to settle disputes that happen later in the relationship. I think this is one of the key reasons why delineating the obligations of both parties in a contract is important. It forces both to read and understand exactly their commitments as part of the relationship. However, in the imagination of worst-case outcomes of the contract (i.e. what happens if things go wrong), it can be very easy to sabotage the relationship by trying to control the other party. As each puts punitive damages in the contract, they imagine the other person sabotaging them which can create a stance of opposition rather than being on the same team. This is not to say that one should not discuss what happens in case of a breach, but they must walk a fine line of trying to control vs. trying to clarify.
Great comments Chad. Thanks for taking the time!
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