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What Do I Need *In* My Contract?

So, you decided to use more than a handshake but what language do you actually use?

Disclaimer: The following information does NOT constitute legal advice and is only for general educational purposes. Each situation is different and specific legal issues usually require additional research and investigation, so do not rely on this article to address a particular legal issue; use this as a starting point to gain a general understanding. This article, although educational in purpose and substance, nevertheless, might be deemed attorney advertising, and prior results do not guarantee future success.

1. Parties, Money & Stuff, Place, Time (PMSPT)

Ok, just so you know, every lawyer will tell you a real contract has to have "Offer, Acceptance, Consideration," and maybe something like "Mutuality" and other things like "Capacity," etc. That's all technically true from a legal point of view, but isn't much help to you without grounding it in something you can "touch and feel."

What all these really come down to anyway is PMSPT (Parties, Money & Stuff, Place, Time). Who is the contract between? Mr. Jones and Ms. Doe? What's being traded? How much money and what stuff are they getting for it? Where will the goods / money or whatever of value be transferred and how? Over what time period?

2. Who's Party is this Anyway?

Who is the contract between? Oh, you think this is obvious, do you, huh?

Suppose, you operated a business Joe's Candy Store, and you order a hundred boxes of awesome "ChocoBars" from Charlene's Chocolatiers. Is the contract buyer Joe's Candy Store, or Joe Smith owner of Joe's candy store? If Joe's Candy Store doesn't really exist as a separate entity, it might not matter as much, but if Joe's Candy Store is really a limited liability company and if Joe's Candy Store defaults on its purchase, that's a BIG difference, because it's the difference between Joe being held personally responsible and not (i.e. if Joe has a bad business year and wants to keep his car and his house, he better make sure the contract is with Joe's Candy Store LLC not Joe himself, personally).

3. Money And Stuff

This is always the best part. It's usually what other lawyers refer to as the "Consideration."

"Consideration" can be all kinds of things: like stuff for money, money for stuff, money for money later (ask your banker if you're confused - it's called interest), money for work or services performed (salary, consultant fees), and so forth. In this case it's chocobars (stuff) for $$$$ (and vice versa). If you don't know what you’re buying or for how much, it's hard to have a contract. So, in your own contracts, be as specific, as you can be.

Joe: I will give you $1,000 for 100 boxes of chocobars, what say you, Charlene?

Charlene: deal!

All good? Yes, *if* each box of chocobars is exactly what Joe was expecting and Joe is honest and doesn't try and say Charlene shortchanged him by shipping less than "he expected." Otherwise, Joe and Charlene better say how much each box is supposed to weigh in chocolate or how many bars, and how big the bars should be, etc.

My Secret Sauce: I do everything possible to "break" a contract before I finish drafting it. If anything is unclear or doesn't make sense I try to fix it with as much reasonable effort as possible.

4. Shh, Places Everyone!

It would be fairly disconcerting if Charlene shipped her chocobars to the wrong address, huh? Who's going to pay for the mistake? What if the chocobars melted b/c they never made it to Joe's refrigerated warehouse on time?

You already know to make sure you cover the "What"; now you need to cover the "Where". Again, in your own contracts, be specific. 1313 Mocking Bird Lane, Fourteenth Floor, Wala Wala, Washington. If there 100 floors in the building and you are the subtenant of someone on the 14th floor, and your name isn't in the directory, good luck getting your package if you don't have precise details.

5. Lost Time is Never Found

Time is important all over your contract.

When does the contract begin? On the date listed in the beginning (which so many people forget to fill out) or when all parties sign it? You better know, because it's a lot easier to cancel a contract that has not yet begun. BIG difference.

Here are some other fun questions for you: when does the contract end? The later of when money and goods change hands? (i.e. you ship the goods, then I pay you, the contract ends? or I pay you first, then you ship the goods, then the contract ends?). When are the goods or payment due? All at once? At different times? What happens if one or both are late? Can you cancel the contract? Charge interest? From what point? How are late fees and insurance calculated? Saying 10% annually for late payments doesn’t help as much if you don't know exactly when a payment is considered late. Do any contract provisions survive the end of the exchange and go on forever?

Other questions about time can involve milestones, cancellation fees, recurrent services or charges, on and on. It's a lot more complicated than most bother to contemplate.

Conclusion: Clarity and Consistency Cures Clueless Confusion

The more clear and consistent you are throughout the contract, the less confusion you will have.

Confusion is probably the #1 killer of all contracts. That's how bad things happen. Do you use an umbrella that works some of the time or do you want it to work all the time? What about your car, do you always want it to start when you turn the key or are you ok when it only works occasionally and you aren't even sure when that "sometimes" is going to be?

Having confusion in a contract is like saying you don't care if it works all the time. It may or may not "work" for you when you need it. I don't know about you, but I don't see the point of going through all the time, effort and expense of drawing up a contract if you aren't even sure that it's going to work. But, hey, maybe that's just me.

Otherwise, remembers your 5Cs and you'll be fine.


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