The BUSKLAW August Newsletter: Clean Out Those Cobwebs in Your Contracts!

August 1, 2019 Chadwick C. Busk

Cobwebs are subtle signs of neglect. Although supposedly spider-generated, I swear that they appear out of thin air. They sneak into attics, ceiling corners, under sinks, and in the guts of your personal computer. But they can also lurk in your contracts, figuratively speaking. August is the perfect time to pause your hectic pace (perhaps while your tireless first assistant is enjoying a rare vacation), open your contracts file cabinet, and clean out the cobwebs in your contracts.

Before we discuss the cobwebs to search for and destroy, you may respond, "but I don't have a contracts file cabinet - all my contracts are stored digitally on my computer." Wrong approach! It makes good sense to print out your contracts and put them in a physical (dustproof) file folder that is then stored in a physical (fireproof and locked) file cabinet. Does this sound old-fashioned? Consider the established fact that reading text on paper has several advantages to reading text on a screen, as this Scientific American article describes. So fire up your printer and print out your contracts "before you dot another 'i' Bob Cratchit!"

So we'll assume that you now have your paper contracts in front of you. Let's begin the cobweb-cleaning work. Here's what to look for:

Are your contracts legible, i.e., can you actually read the print on all of the pages? When I practiced in U.S. Bankruptcy Court (a long time ago), Judge Nims wouldn't even consider admitting a document into evidence unless it was totally legible. So if you discover unreadable pages in your contracts, you need to fix that, even if it means asking the other party for a clearly readable copy of the contract.
Are your contracts signed and dated? I once had a client who (before they hired me) avoided signing any of their contracts (after the other party signed first and would hopefully forget to ask for a fully-signed copy) on the assumption that if the relationship didn't work out, you could escape liability because you never signed the contract! Nice try, but it doesn't work that way. If the parties acted according to the contract, a judge or jury may find that the contract is enforceable, even if it wasn't fully signed. (And no, "executed" isn't the synonym of "signed.")
Are your contracts still in effect? Do you track the expiration (and any renewal) terms of your contracts? The more contracts that you have, the more likely it is that you are operating under an expired contract. This can cause problems for everyone involved. If you want the relationship to continue, you best prepare an amendment retroactively extending the termination date. But don't be surprised if the other party demands something in return. After all, contracts are a two-way street!
Are you (and the other party) in compliance with the contract's insurance provisions? If your contracts contain insurance provisions (whether applicable to one or both parties) are you in compliance? What about the other party? Unless you have a close relationship with your risk manager, you may not know if your company still has the required insurance coverages in effect, or if the same is true for the other party. And if the parties are required to exchange insurance certificates reflecting the required insurance, do you have a current insurance certificate from the other party? And if the contract requires the other party to name you as an additional insured, does your insurance certificate from the other party reflect that? If not (e.g., the certificate simply names you as a "certificate holder"), you have unexpected liability exposure to third-party claims.
(For IT folks) Do you have contracts for cloud services? If so, whether you are the customer or vendor, the data security provisions deserve close scrutiny. Data security standards and audit rights are essential parts of any cloud services agreement together with appropriate insurance, indemnity, and limitation of liability provisions. (If you have any questions about those, please remember this recent post.)
Do your contracts contain confusing, ambiguous, and turgid legal jargon? My readers know the mantra: lawyers who draft contracts containing legal jargon are doing a great disservice to their clients. It's axiomatic that legal jargon leads to disputes, disputes lead to litigation, and litigation outcomes at best are a Pyrrhic victory. So if your lawyer doesn't use plain language principles advocated by such respected legal scholars as Ken Adams, Bryan Garner, and Joe Kimble, find a lawyer who does and have them cleanse that poppycock from your contracts. (If you need help with that, drop me a line.)

Having eradicated these cobwebs from your contracts, you can show your first assistant that you remained terrifically productive during her summer-vacation absence!

If you find this post worthwhile, please consider sharing it with your colleagues. The link to this blog is www.busklaw.blogspot.com and my website is www.busklaw.com. And my email address is busklaw@charter.net. Thanks!

The BUSKLAW May Newsletter: "Here's Another Clue for You All, the Walrus Was..."

April 30, 2019 Chadwick C. Busk

To continue the title: Paul. As in Sir Paul McCartney. But in 1969, there was a problem: several radio stations broadcast a conspiracy theory: Paul died in a car crash in 1966. And the remaining Beatles covered it up and replaced the dead Paul with an (apparently equally-talented) imposter. Fans began scouring Beatles songs for evidence of the ruse; they pointed to "The walrus was Paul" line from the song White Onion, concluding that "walrus" was the Greek word for corpse (it isn't). in reality, John Lennon was messing with fans' propensity to find meaning to those lyrics when there was none. In an interview for what later became the Beatles Anthology television documentary, John said:

I threw the line in—"the Walrus was Paul"—just to confuse everybody a bit more. It could have been "The fox terrier is Paul." I mean, it's just a bit of poetry. I was having a laugh because there'd been so much gobbledygook about Pepper—play it backwards and you stand on your head and all that.

Despite John's explanation for Paul the walrus, the Paul is dead urban legend continued long after 1969; in 2009, Time magazine included the tale in its article on ten of "the world's most enduring conspiracy theories."

Because there's something in the human psyche that won't let go of patently false assumptions. Psychologist Valerie Tarico observes that "false ideas can be sticky...they can spread from person to person, getting elaborated along the way until they become virtually impossible to eradicate." Examples of widely-adopted beliefs that aren't grounded in facts abound. Climate change is not happening. An American president was born in Kenya. Wind turbines cause cancer. Vaccinations kill children. And I have another candidate for that list: Legal jargon benefits society.

Time and again this argument has been debunked but persists as a sticky false assumption. Professor Joe Kimble, in his book Writing for Dollars, Writing to Please: The Case for Plain Language in Business, Government, and Law (2012), cites empirical evidence (summaries of 50 case studies) for the enormous benefits of using plain language. And see this Michigan Bar Journal article that my colleague Michael Braem and I wrote describing several proposed justifications for legal jargon and why they must fail.

This brings us back to last month's post where we pulled apart the purchase and operating agreements for the ICON A5, the snazzy, pricey "jet ski with wings." I reached out to ICON's senior management with predictable results. They first thought that I wanted to purchase one of their planes. (No, can't afford it, no place to park it.) Then they thought that I wanted to discuss "jet card options." (What are those, my precious?) When I stated that I was simply giving them the link to my constructive critique of their contract documents, I was met with stony silence.

As the venerable Cully Wilson said, "I tried, puppy." ICON has the right to preserve the useless accuracy of their legal jargon (thanks to Professor Patrick Barry for coining that fitting term). Perhaps I planted a seed, ICON will take another look at their contracts without telling me, and revised, cleansed versions will miraculously appear on their website. (Hope springs eternal, so I'll have to keep checking their website.)

Or perhaps ICON has another motive. One of my constant readers remarked that ICON may want to force a purchaser (or their counsel) to figure out how many ways jargon-filled and vague contract language could be interpreted. Like first having to scale the medieval wall of jargon before getting inside the castle of contents. "It works well, so no reason to 'monkey' with success!" ICON claims that they have sold around 100 A5s, but who's to say that they couldn't have sold more (or the same number with less deal fatigue) with clear and concise contract language?

False ideas and fanciful conspiracies aside, we are left with this truth, so well put by Justice Ruth Bader Ginsburg: "The law should be a literary profession, and the best legal practitioners do regard law as an art as well as a craft." Designing sleek, innovative airplanes (and cars and boats and rockets) is an art too. It's time that the purchase contracts for these marvelous machines join the team!

The BUSKLAW April Newsletter: Pulling Apart the Purchase Agreement for the ICON A5: "The Jet Ski with Wings"

April 1, 2019 Chadwick C. Busk

The ICON A5 is an amphibious "light-sport aircraft" that is marketed primarily to adventurous amateur pilots with deep pockets (and spacious home garages in which to store their ICONs). The plane has a recreational focus; it can seat only two, has limited load capacity, and isn't intended to go very far. The cost of the plane was $139K when first introduced in 2006 but is now $389K for a "fully-loaded version."

YouTube is full of videos showing how much fun you can have with an ICON A5 (especially with water landings and take-offs), bringing to mind the "jet ski with wings" analogy. So the ICON A5 is perhaps the ultimate high-tech, outdoor adult toy (unless you're afraid of heights). There have been several fatalities with the A5, but these apparently resulted from pilot error in one case and reckless flying in another rather than from mechanical defects or design flaws.

The ICON A5 Purchase Agreement (including the Operating Agreement as Exhibit B) may be freely downloaded from the ICON Aircraft, Inc. website. Because folks have criticized ICON for these one-sided contracts in the past, I decided to review the circa 2016-2017 (and supposedly more user-friendly) versions and evaluate them from a structure, style, and content perspective. Here's what I found:

Structure
Lawyers don't often worry about how a contract "looks and feels" on the page, but they should. Font choice and size, text justification, kerning, page margins, numbering schemes and "waterfall" text (long paragraphs with no breaks) adversely affect a contract's readability. If the writing is too dense, the less likely it will be for a deal to be consummated. Contract structure matters.

The ICON Purchase and Operating Agreements are poorly structured, for example:
> The font is too small, giving a new meaning to the term "fine print."
> Kerning issue - the space between the characters is inadequate.
> The text is fully justified but should be left-margin justified for easier readability.
> The Agreements confusingly refer to both "Sections" and "Paragraphs" without explaining a reason for that distinction.
>The Agreements put key provisions in CAPS (again affecting readability) when bold text is sufficient. And there's no need to put the paragraph headings in underlined CAPS. PUTTING TEXT IN CAPS IS SHOUTING, AND NO ONE APPRECIATES THAT! AND BOLD TEXT IN CAPS IS WORSE!
>Romenettes ("i," "ii," "iii," etc.) are used that are non-intuitive.
> Much of the Operating Agreement's legal content could be included in the Purchase Agreement; the Operating Agreement could be shortened and simplified as a result. There's no reason to say the same thing twice - once in the Purchase Agreement and again in the Operating Agreement.

Style
The style of a contract is whether the plain language is used rather than archaic, ambiguous, and confusing legal jargon.

The ICON Purchase and Operating Agreements are rife with legal jargon, for example:
> Use of RECITALS with multiple "WHEREAS" clauses and completely unnecessary consideration recitations.
>Unnecessary capitalizations (e.g., "Parties," "Paragraph," "Agreement,").
>Using the word "executed" when "signed" is intended.
>Use of archaic legalisms (e.g., "IN WITNESS WHEREOF").
>Use of the confusing "and/or" term and redundant phrases like "among other things" and "payment by check will not be deemed received until final funds have cleared the issuing bank."

Content
The content of a contract is judged on whether it efficaciously accomplishes the intended legal and business purpose. In ICON's case, the purpose is twofold: first, to create a legally-binding ICON A5 aircraft purchase obligation; and second, protect ICON from liability for property damage or death resulting from the A5's ownership and operation.

The ICON Purchase and Operating Agreements contain several ambiguous provisions that don't protect the company but are likely to trouble a potential pilot/purchaser:
> The Agreements contain broad liability release and covenant not to sue provisions that include ICON'S negligence, but these provisions will be deleted if the customer agrees to pay $10K more for the aircraft. But $10K more is only a mere 2.6% increase in the cost of the plane! Why not simply exclude the broad liability exclusions from the agreements and increase the cost of the plane to begin with? This would help simplify the contract and make the deal much more palatable to potential ICON A5 purchasers.
>At the aircraft sale closing, ICON will deliver the "then-current" A5 Limited Warranty. If I'm the buyer, I'd want a representation that the Warranty delivered at the closing won't be any less favorable to me than the Warranty that I reviewed when I signed the purchase agreement.
>As stated in the agreement, ICON may delay the sale closing date indefinitely (but must adjust the purchase money deposit due dates). Buyer should have the right to cancel the purchase agreement (and receive a full refund of their deposit) if ICON delays the estimated closing date by more than "X" days. (30 days would be typical.)
>Buyer acknowledges that the A5 is not "suited or authorized...for aerobatics." The buyer should ask that "aerobatics" be defined since part of the appeal of flying the aircraft is that it can be used for fun, arguably including "aggressive flying."
>Buyer understands that it is "receiving an early production run aircraft and as a result, service bulletins may initially be frequent, and that ICON's service network is not yet fully developed." The buyer should demand this sentence be deleted because the aircraft was first marketed in 2006 and the ICON service network should be fully developed (in the U.S.) by now. (If the service network isn't fully developed, the gaps should be identified.)
>I have several "inside baseball" criticisms better discussed between lawyers.

The purchase and operating agreements show that ICON is very sensitive about its reputation. It doesn't like negative publicity, including reports of accidents involving its aircraft. And ICON recognizes that it has liability exposure to amateur pilots looking to have fun in an aircraft that can cause trouble; there's little chance of successful legal action against ICON for death, injury, or property damage resulting from the plane's use or ownership. So if you buy an ICON A5, you are "joined at the hip to ICON" for as long as you own the plane (and you can only re-sell it to an ICON-approved buyer). Caveat emptor.

Conclusion
ICON's purchase and operating agreements aren't acceptable from either a structure or style view - they are over-lawyered. The sleek lines of the ICON A5 aren't carried over to their contract documents. Their content is generally acceptable but should be reworked and reorganized. This contractual renovation wouldn't be a trivial undertaking; however, it could be accomplished without reducing the protection that the contracts' risk-shifting provisions afford to ICON. And here's the upside of a clear and concise ICON A5 purchase and operating agreement: selling more airplanes!

I plan to send ICON a link to this post to see if they care to respond to this constructive critique, and I'll let you know if they do.

The BUSKLAW March Newsletter: Don't Use "Form" Contracts!

February 28, 2019 Chadwick C. Busk

I have a confession: I'm an office-supply-store junkie. I love to browse the shelves brimming with multi-colored pens, pencils, file folders, legal pads, rubber bands, and paper clips. (Yes, paper clips - the gold ones are especially snazzy!) And I love the snacks that you can buy in bulk, especially Twizzlers. Because if you brought that decorative low-fat snack back to your office, your colleagues would praise you for giving them something tasty that also satisfies the common urge to relieve stress by chewing things.

But there's a dark side to office supply stores: they sell form contracts. The fill-in-the-blank, "one-size-fits-all" kind. (The General Agreement is my Bizarro-World favorite; then again, as Shakespeare said, "What's in a Name?")

There are several reasons why using off-the-shelf legal form contracts is ill-advised:

1. You don't know if the form contract complies with your State's law. Even if a form is labeled "suitable for use in [your State]," you have no assurance that it complies with your State's law in effect on the day that the agreement is signed, and no appropriate remedy if it doesn't. A refund of the cost of the form, perhaps, but so what?

2. What about the form contract's relationship to other legal documents? The form likely refers to other legal documents, and it's too easy for a non-lawyer to ignore those or fail to understand how they should relate to the principal form. For example, many professional services form agreements refer to a statement of work ("SOW") that should be attached to the agreement, but what if the SOW conflicts with the agreement in some way? In some cases, the SOW should control; in others, the agreement should take precedence. There's no way that an untrained person can decide which document should control.

3. The form contract doesn't consider your business culture. In my legal practice, I try to understand my client's business culture, including their appetite for risk - and their available insurance coverage. But it's impossible for the author of a form agreement to draft it with these considerations in mind. For example, your management might prefer mandatory arbitration of disputes arising from the agreement rather than litigation. The form may not reflect your management's position on this and other areas where business preferences intersect with legal terms, such as provisions excluding certain damages and limiting liability.

4. The form contract doesn't account for your bargaining position with the other party. A competent contract attorney learns the extent that his client has bargaining leverage over the other party and drafts (or reviews) the contract accordingly. But form contracts have no way to gauge the parties' bargaining leverage, resulting in generic or neutral provisions that may not adequately favor the party having that leverage.

5. The form contract will probably contain ambiguous, confusing, and litigation-engendering legal jargon. Most form contracts rehash other old contracts without considering the stupid legal jargon that should be tossed out and replaced with plain language. I've talked a lot about how legal jargon hurts the reader's understanding of a contract and can lead to litigation, and it's likely that a form contract will be rife with it. Here's my humorous treatment of legal jargon. For a more serious perspective, here's an article that I wrote for the Michigan Bar Journal.

For these reasons, if you use form contracts, you're rolling the dice on whether they will accomplish your legal - and business - purpose. So don't use them!

The BUSKLAW February Newsletter: "What's in Your Contracts?" The Case for Auditing Your Contracts (Part 2)

January 30, 2019 Chadwick C. Busk

In last month's newsletter, we discussed the importance of auditing your business contracts and pointed to five potentially troublesome provisions: identification of the parties, agreement term, payment, intellectual property rights, and confidentiality. But there are additional provisions that deserve careful scrutiny:

> Indemnification. To understand this concept, start with three players: the parties to the contract (call them Able and Baker) and a third player who isn't a contracting party (call him Charlie). Let's say Able manufactures widgets, Baker sells them in its retail stores, and Charlie is a customer who purchases an Able-produced widget from Baker. The widget injures Charlie. Charlie's lawyer sues Able and Baker because Able produced the widget and Baker sold it to Charlie. Baker's only involvement was selling the widget, so he tells Able to take care of it, i.e., defend him in the lawsuit and pay the settlement or the court judgment if the case goes to trial. The extent to which Able must protect Baker from Charlie's lawsuit is what indemnity is all about; chances are that the sales contract for the widgets between Able and Baker discusses indemnification. Lawyers love to fight over indemnity, including whether the buyer's negligence is covered, i.e., if Charlie's injuries from the widget didn't result from a manufacturing defect but because Baker damaged the widget before it was sold to Charlie and thus created the hazard that caused Charlie's injury.

The proper drafting of indemnification provisions is crucial, and exceptions or conditions to the duty to indemnify should be carefully stated. And indemnification should always relate to third-party claims and not to damages between the contracting parties for breach. Do the indemnity provisions in your contracts pass this test?

>Insurance. Insurance provisions are vital in business contracts, but in my experience, transactional lawyers don't always understand the various insurance coverages available and how they relate to other contractual provisions. Using the above example, Baker may require to Able to maintain contractual liability insurance (and Able may want this as well) to fund (or "insure over") Able's obligation to defend Baker from Charlie's product liability suit. And cyber-risk insurance has become available that should protect a company from claims resulting from data breaches. Companies that handle customer data should seriously consider obtaining that insurance, and a savvy information technology/business lawyer can add value to that process. Is your insurance coverage adequate and complete? Is it properly described in your contracts? What about the other party's insurance?

>Limitation of Liability and Exclusion of Certain Damages. These are key provisions that must be carefully considered unless you don't care about "betting your company" by having unlimited liability when you sign a contract. To simplify a bit, there are three major points to ponder: first, whether there should be a cap on direct damages resulting from a party's breach of the contract; second, whether a party's indirect damages should be entirely excluded from available damages resulting from a breach; and third, whether a dollar cap should apply to a party's obligation to indemnify the other. Do your contracts contain understandable limitation of liability and damages exclusion provisions? And are they consistent with all of the other contractual provisions?

>Governing Law, Jurisdiction, and Venue. What State's laws govern your contract? If you're a Michigan-based company doing business with a California-based company, you probably shouldn't agree that California law governs the contract. And where would legal action under the contract occur? Would you rather litigate in a Michigan court or in a California court? Your decision could make the difference between driving to court proceedings in downtown Grand Rapids - or lengthy plane trips to and from a California court. Do the governing law, jurisdiction, and venue provisions in your contracts prevent you from being dragged into a faraway court?

>Litigation or Arbitration of Contract Disputes. Arbitration proceedings are private; court proceedings are not. Would you care if the news media attends court hearings about your dispute? And court proceedings may be more expensive than arbitration and may involve a jury trial. But if your arbitration provision isn't carefully drafted, you may wind up spending just as much for arbitration than litigation. Do you know if your contracts contain litigation or arbitration provisions? If arbitration, is that provision carefully drafted to ensure that arbitration would indeed be less expensive than litigation?

>Legal Jargon. I've already posted about lawyers and their goofy words. But some legal jargon should simply be removed from your contracts: "and/or;" "execute" to mean "sign;" vague pointing words such as "aforementioned," "foregoing," or "below;" confusing phrases such as "including but not limited to," "in witness whereof," and "for the avoidance of doubt;" and such verbs as "may," "must," "will," and "shall," that can be confusing when used in the wrong context. And the stupid yet common practice of writing numbers in both words and digits, e.g., "thirty (30)." All it takes is a contract containing "fifteen (30)" to land you in court. Have you detected and removed all legal jargon from your contracts? (If your lawyer uses legal jargon, best get a new one.)

And what about words or phrases that sound like legal jargon but aren't? Two examples: first, there's definitely a need to insert "hereby" in some cases. Second, "according to" isn't necessarily the same as "in accordance with." And to further complicate matters, some apparent legal jargon should be retained as terms of art. Do you know what specialized legal language should remain in your contracts - and why?

When Ben Franklin said that "an ounce of prevention is worth a pound of cure," he didn't have contract audits in mind, but his logic holds true. You can hire me to find and correct these potential problems in your contracts for a modest fee. Or you can wait until they blow up and you're forced to hire a litigator to sort them out - at a much greater cost.

2019 is here. What's in your contracts?

The BUSKLAW September Newsletter: Lawyers and Their Goofy Words - and What to Do About It

August 29, 2018 Chadwick C. Busk

Growing up, I was told that lawyers were smart cookies. After all, getting a law degree isn't an easy task. You first go to college and find a subject that is best suited to how your brain works so that you can maintain a high GPA. In my case, I quickly discovered that I wasn't a good fit for the "hard sciences." So I took a lot of Political Science and English courses, learned how to write fairly well, suffered through the tedious law school aptitude test on October 20, 1973, graduated with a B.A. degree in 1974 and then went on to law school. There, I endured a legal education infused with the Socratic method (here's an example), suffered occasional migraines (because some of my law professors were truly smart but couldn't teach) and graduated with my law degree on Mother's Day, 1977. Passed the Michigan bar exam and by God, became an honest-to-goodness lawyer in November of 1977!

So having gone through undergraduate studies, law school, and the bar exam, lawyers can't stomach the idea that their legal prose is anything less than Hemingwayesque.

Here's the truth: lawyers write contracts most of the time with little attention to what their words actually mean. Their brains are on automatic pilot, using forms written by older lawyers with their brains on automatic pilot. Here are just some of the goofy words that commonly issue from lawyers' keyboards to befuddle their readers (unless the readers are other lawyers with THEIR brains on automatic pilot):

Herein, wherein, and provided words. These words are vague and often confusing. Consider this sentence, Except as provided herein, Able shall pay Baker $10,000 for his vintage Star Wars toy Death Star. But what does herein refer to? A contrary or conditional statement in the same paragraph, in the next paragraph, in the preceding paragraph, or somewhere else in the contract? Wherein suffers the same fate, and provided is used to express a condition or qualifying statement when a simple but will suffice.
The following is a common closing sentence to a contract: IN WITNESS WHEREOF, the parties have executed this Agreement on May 15, 2018. There are multiple problems with this sentence. First, the phrase IN WITNESS WHEREOF is archaic, means nothing, and can safely be deleted. Second, the verb execute is misleading. The common meaning of execute is to do or perform something. So can we replace execute with performing as in The parties are performing this agreement on May 15, 2018? No, because the contract signing date usually precedes its performance! So "execute" is a poor verb in this sentence. Finally, there's no reason to capitalize Agreement. The common sense approach is that the signed document is the parties' agreement. So, let this closing statement simply say, The parties are signing this agreement on May 15, 2018.
Consider lawyers' fixation on such as in these sentences: Able shall pay Baker $10,000 for his vintage Star Wars toy Death Star. Such Death Star is in its original packaging. When used in this example, such is a needless pointing word. Consider deleting such and saying: Able shall pay Baker $10,000 for his vintage Star Wars toy Death Star in its original packaging.
Using and/or. The use of and/or has created countless ambiguities in legal documents. Consider this sentence: Able shall sell to Baker 25 bushels of the following Michigan-grown produce: apples, peaches, cherries, and/or celery. Is the intent for Able to sell apples, peaches, and cherries or celery to Baker, or must Able sell all of these listed items to Baker as the and word suggests?
Using shall instead of will to denote a contract party's obligation. Plain-English legal scholars have long argued about what verb is the best, as in Able shall sell widgets to Baker or Able will sell widgets to Baker. I recently wrote a Michigan Bar Journal article that summarizes the arguments on both sides and suggests a common-sense solution.

So how do you know if your contracts contain these (and other) goofy words? You could enter these words in the word finder box in your word processing program or PDF reader and see what turns up. But that process would take time, and you would miss the context of how these words are used. A better approach would be to take advantage of my free contract review offer, described here, and let me do it for you.

Carl Sandburg wrote a little poem about lawyers (The Lawyers Know Too Much, 1920) that includes this stanza:
In the heels of the higgling lawyers, Bob,
Too many slippery ifs and buts and howevers,
Too much hereinbefore provided whereas,
Too many doors to go in and out of.

Let me find those dead-end contractual "doors" for you - and see if we can close them!

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The BUSKLAW March Newsletter: Of Pie and Plain English

February 27, 2017 Chadwick C. Busk

I love pie and plain English about equally, although plain English is less fattening. Pie - especially the caramel toffee apple variety - for Thanksgiving is especially grand because afterward, you can eat leftover pie for breakfast without a lot of guilt. And chances are that the rest of the household won't consider pie a suitable breakfast food, so you're good to go.

Grand Rapids, Michigan, is blessed with an excellent source of pies: Sweetie-licious. Until recently, they had two locations: one in GR's Downtown Market and the other in beautiful East Grand Rapids. I grew up in EGR and still fond of the place. So it was very convenient to journey across town to Sweetie's EGR location to pick up a pie for holidays (or when the pie lust grew to be unbearable).

Because life isn't fair, Sweetie-licious closed its EGR location several months ago. (But mercifully their Downtown Market location is still going strong.) When I sauntered past their empty EGR storefront recently, I noticed the above sign posted on the door. Yikes! The place is haunted by the ghost of bureaucratese, a style of language held to be characteristic of bureaucrats and marked by abstractions, jargon, euphemisms, and circumlocutions. Bureaucratese is the close brother of the legal mumbo jumbo that plagues most contracts. The venerable Kent County Health Department should know better!

Let's see if we can revise this Notice to be more user-friendly. We'll leave the NOTICE title and the Kent County Health Department "signature" alone and concentrate on the mighty text. How about the following:

THE KENT COUNTY HEALTH DEPARTMENT MUST INSPECT AND LICENSE THIS SPACE BEFORE IT MAY BE CONSTRUCTED, REMODELED, OR OPERATED FOR FOOD SERVICE.

This revision accomplishes the same thing as the original gobbledygook in refreshing, easy-to-understand plain-English. Here's a list of the changes and the reason for each:

We changed the negative prohibition in favor of a positive command in the active voice.
"Facility" is too vague. Any empty retail space is not a "facility." Why not just call it a "space"?
"Shall" is archaic. "Must" is better!
There is no reason for "REMODELED" and "ALTERED." They mean the same thing in this context, so let's ditch "ALTERED."
"ESTABLISHMENT" is just silly! Just change the phrase to say "FOR FOOD SERVICE."
I deleted "APPROVD" (sic) because obviously the the Kent County Health Department won't issue a license for operation unless they first approve the construction and remodeling of the space.

You might wonder why converting this Notice into plain English is a worthy exercise. The reason is because bureaucratese insults the intelligence of the reader and lends false credibility to the government agency behind it. And the last thing we need in this day and age is a government agency - whether federal, state or local - plagued by a credibility gap. So it makes sense for us to call out stupid jargon whenever we come across it, even in our search for pie!

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If you find this post worthwhile, please consider sharing it with your colleagues. The link to this blog is www.busklaw.blogspot.com and my website is www.busklaw.com. Thanks!

The BUSKLAW December Newsletter: Consider a Legal Audit of Your Contracts

December 1, 2016 Chadwick C. Busk

Most of you are business professionals and thus are involved with contracts. Depending on the nature of your enterprise, you have various contracts in force, for example:

>sales agreements

>purchase agreements

>real estate leases

>purchase order terms and conditions

>software license and maintenance agreements

>service agreements

>equipment maintenance agreements

>consulting agreements

>contractor agreements

>employment agreements

>non-disclosure agreements

>non-compete agreements

>transportation or logistics agreements

>financial institution agreements

Perhaps you work with these documents on a regular basis and are familiar with their content. Or you pay a high-priced law firm to do that for you. More commonly, however, you keep these documents in a file cabinet, rarely review them, and only call your expensive big-firm lawyer when there are problems with the transaction. Whatever the case, consider the advisability of a legal audit to focus on the following:

Are your contracts properly signed, dated, and legible to the reader? I once had a client who had the other party sign its contracts but never signed them itself, thinking that if something went wrong, it could argue that it never agreed to the contract. This is a poor - and fruitless - approach to contract administration. And I once had a judge refuse to admit an opposing party's contract into evidence because the text was unreadable.
Are your contracts still in force or have they (intentionally or not) expired? Do you know the steps to renew (or terminate) them?
Do you have multiple contracts with the same party that may conflict with each other? You may have a master agreement and an operating agreement, a term sheet, or a statement of work with an outside party. But if you don't carefully specify what agreement controls, you may find yourself in a court battle as my colleague D.C. Toedt discusses here.
Do your contracts contain ambiguous and confusing legal jargon? Examples of legal jargon (and suggested remedies) are discussed in this article that I wrote for the Michigan Bar Journal. Legal jargon is more than a nuisance; it can lead to costly litigation about what the parties intended. And there are no excuses for legal jargon, as my colleague Michael Braem and I point out in a recently-published Michigan Bar Journal article.
Do you have a contract management system? The system can be as a simple as a table or spreadsheet or as complex as an enterprise software solution. But due diligence demands that you keep track of your contracts, including key provisions, expiration dates, and renewal deadlines.
Finally, do you have a corporate records retention policy (with a designated record retention manager) that requires the preservation of your contracts for the proper period? If not, you could get in trouble for destruction of evidence if you discard a contract that is (or becomes) the subject of a lawsuit.

The purpose of a legal audit is quite simple: find potential problems with your contracts now and fix them before they can lead to a costly and time-consuming legal dispute.

A legal audit of your contracts makes sense even if you already have an established relationship with a lawyer who may have prepared your contracts. The old adage that "two heads are better than one" makes good sense here. And my view is that even experienced corporate lawyers conducting a legal audit for their clients shouldn't "get rich" in the process but instead charge a reasonable fixed fee largely based on the number of contracts reviewed. (You'll recall that my approach to practicing law is stated here.)

So as you are getting in the holiday spirit with inspirational music and stories of Xmas long ago, consider a legal audit of your contracts as an appropriate "gift" to your bottom line.

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If you find this post worthwhile, please consider sharing it with your colleagues. The link to this blog is www.busklaw.blogspot.com and my website is www.busklaw.com. Thanks!

The BUSKLAW June Newsletter: Do Your Contracts Contain "Empty" Words?

May 31, 2016 Chadwick C. Busk

Until 1800 or so, lawyers who drafted contracts in the U.K. were called scriveners, and they were paid by the number of words in their documents. More words resulted in more money. This encouraged the use of excessive words in contracts - and the legal mumbo jumbo that plagues the legal profession to this day.

"Empty" words in a contract are more than just unnecessary; they create ambiguity, cause confusion, incite litigation, and increase the time it takes to read and understand a contract, especially for the business folks who must understand the contract to effectively administer it.

Most contracts (especially the forms that you can download from LegalZoom and RocketLawyer - excuse me if I don't give you the links) contain empty words, and these are some of the worst offenders:

Archaic words. At the beginning of a contract, you'll often see a paragraph with the heading "Recitals" followed by several "Whereas" clauses and concluded by a "Therefore" clause that commonly includes the phrase "in consideration of." None of these terms add any business or legal value and should be junked. Better to replace them with an introductory paragraph captioned "Background" followed by a brief description of the parties' business relationship giving rise to the contract. And there's no excuse for the phrase "in witness whereof" before the parties' signatures at the end of the contract!

Confusing references to the contracting parties. For example, software license agreements commonly refer to the parties as "licensor" and "licensee." These words are so similar that it's easy to use the wrong one. Why not simply use the real names of the parties? Just define "Able" as licensor and "Baker" as licensee at the beginning of the agreement, and then use Able and Baker throughout the document.

Vague antecedent references. In the body of the contract, you'll often see such terms as "said," "such," "aforementioned," "above-mentioned," "hereinabove," "above," "foregoing," or the like. These terms often cause problems. For example, beginning a sentence with "except for the foregoing..." What does "foregoing" refer to? A preceding sentence or a preceding paragraph? Judges have had to grapple with these terms to decide what the parties intended when there is a lawsuit over what one of these terms actually referred to.

Words used incorrectly. The phrase "due to" shouldn't be a substitute for "because." The proper use of "upon" is only for a condition or event. The verb "execute" shouldn't be used in lieu of "sign." The phrase "provided that" is usually not the best way to describe a condition. And don't use "shall" and "will" to create language of obligation interchangeably; better to forget "shall" altogether and use "will" or "must." And "which" should only replace "that" before a non-restrictive clause that is preceded by a comma.

Grandiose words. The words in this bucket sound impressive but usually add nothing of substance where they appear: "forthwith," "merely," "completely," "duly," "whatsoever," "without limitation," and "for all purposes." Other examples: "with respect to," "in connection with," and "in order to." And "prior to" is best replaced with "before." Finally, "as of" should be replaced with "on."

Lawyers have various excuses for holding on to legal jargon. I will address these in a future post. For now, let's make a long story short: none of the excuses for using empty words in a contract are persuasive.

An effective contract creates an easily understandable blueprint of the parties' legal and business relationship rather than a meandering mystery tour of that relationship. If you find that your contracts are rife with empty words, the remedy is simple: find a lawyer who will take the plain-language pledge and purge these pointless words from your contracts! As for me, I'll practice plain-language principles until the hearse horse snickers as he hauls my carcass away.

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If you find this post worthwhile or entertaining, please consider sharing it with your colleagues. The link to this blog is www.busklaw.blogspot.com and my website is www.busklaw.com. Thanks!

The BUSKLAW May Newsletter: Refuting the “T-Shirt Indictment” Against Lawyers

May 1, 2016 Chadwick C. Busk

“I’m a lawyer. I solve problems you never knew existed

with words you don’t understand.”

On the internet, you can buy a t-shirt bearing this indictment against lawyers. But is this allegation credible enough to be displayed to the public - or is it cringeworthy? Let’s pull it apart and see where we end up!

This is a true story. In the 1980s and 90s, a local real estate agent (call him Steve), owned a series of family restaurants in the small cities surrounding Grand Rapids, Michigan. Each restaurant had a PA system that re-broadcast local radio stations to Steve’s customers. One day, an ASCAP representative visited one of Steve’s restaurants, heard the radio station on the PA, and asked the manager if the establishment had a license to re-broadcast the music. The manager referred the ASCAP representative to Steve, who promptly told the representative to “pound sand.” Steve used his common sense to conclude that if he could listen to radio stations in his car or at home without charge, the patrons of his restaurants could do the same. So, this whole ASCAP business must be a scam. It was only after a series of ASCAP letters and the threat of a copyright infringement lawsuit (and finally consulting with an intellectual property rights attorney) that Steve settled with ASCAP for substantially more than what he could have paid for a license after ASCAP’s first contact. And ASCAP added a surcharge for Steve’s willful infringement plus interest.

Steve’s need to obtain an ASCAP license is something that he “never knew existed.” His common sense was wrong. He should have contacted an IP lawyer the minute that ASCAP approached him. So, the first part of the T-Shirt Indictment is correct: lawyers solve problems that their clients never knew existed. But instead of being a criticism of what lawyers do, this is a benefit. Good lawyers add value to the business deals that their clients initiate. How? First, by drafting contracts that clearly document the business understanding. Second, if problems develop after a contract is signed, by applying their analytical skills and legal knowledge to promptly resolve the problems to their clients’ benefit.

The second part of the T-Shirt Indictment is a closer call: that lawyers solve problems with words that their clients don’t understand. It’s true that many lawyers don’t see the wisdom in these words from Mark Twain: “I never write ‘metropolis’ for seven cents when I can write ‘city’ and get paid the same.” But many attorneys, including the author, strive to use plain English rather than wordy, unclear, pompous, and dull legal jargon. And the Michigan State Bar Journal (a monthly publication sent to each active Michigan lawyer) has published a plain-language column every month for the last 32 years. If your lawyer drafts a contract containing words that you don’t understand, you should ask him or her to justify the use of those words. Further, tell your lawyer that you expect this explanation at no extra charge, because lawyers have an ethical obligation to not only know the applicable law but also to write well. They shouldn’t charge you a fee to explain how they’ve met their ethical obligations.

So once pulled apart, this T-Shirt Indictment is mere blather. As Gertrude Stein would say, “there is no there there.” It may fit some lawyers, but it shouldn’t fit your lawyer!

The BUSKLAW Newsletter