Entrepreneurs, Welcome to the Law, Part 3

Part 3 is about contracts and how parties litigate over points. Basically, the better the contract you negotiate ahead of time, the stronger your litigation position will be.

Contracts
Any contract can be written from scratch, and any contract handed to you is written to benefit the writer. These are the basics of any contract.
*Keep negotiating until you get each of these.

- Define the duties and standards of performance. In other words, explicitly write down every thing each side has to do. Not only what to do, but how well it needs to be done.
- Define ambiguities, terms, and foreseeable issues. Every business has jargon, special terms, and technical terms. Everything should be clear to both sides. If there is an issue that could come up, define it and the contingency plans. This is what makes contracts so wordy.
- Define the context, inherent risk, and the assumptions of the contract. Risky businesses need a lot of assumptions and calculations. Make sure that both sides understand the nature of the business and how risky it is.
- Clearly set out the pricing structure. Spell out how much money is due, and when it is due.
- Define control and property rights. This is the proverbial baby in the bathwater. This is the cash cow. My be it is a house, the right to live in a house, the right to make money off of a book, or any other set of rights. In addition to the right to money, define the right to have final authority over the property.
- Write duration and termination clauses. When and how either of you can get out of this arrangement must be understood.
- Set forth the process to resolve controversies. A contract or lease is a legal document, meaning it can be enforced in court. You must have a plan for arbitration and litigation. An important part is whether it will be decided in your state, or elsewhere.
-Make sure each party acknowledges in writing that they understand the seven points above.



Primer on Litigation
Documented evidence is the key to all legal disputes. About 95% of all civil lawsuits are settled, and about 95% of all criminal charges are plea bargained. Hardly anything goes to trial. In the settlement negotiations, the side with the most documented evidence has the most leverage.

The practice of law however is geared toward trials. Trials are about proving the elements of various laws. A good example of lawyerly thinking is watching the instant replay of a close call in football. You must show the ball in possession with both feet in bounds. Those are two elements that must be proven, with a receiver being pushed out of bounds an exception. Documented evidence and witness statements are all about proving an element at trial. In a press release, do not admit to an element of a cause of action (law being sued about).

Common lawsuits for a businessperson are “Slip ‘n Falls” torts, wrongful termination, breach of contract, and false imprisonment.

The Media
Reporters are storytellers. They are using you for a controversial story and you are using them for free publicity. There is no such thing as off the record, so make sure everything you say is designed to promote your company’s message.