When did Noah build the ark?

In the movie “Spy Games (2021),” a character emphasizes the importance of preparation by asking, “When did Noah build the ark, Gladys?” The response, “Before the rain, before the rain,” underscores the significance of proactive measures. This analogy resonates in business, where careful contract review before execution is crucial to avoid stress, financial risks, and wasted time. Unfortunately, many businesses overlook this pre-contract review, leading to issues later on, such as lawsuits and legal conflicts that distract from legal goals. It’s advisable to have an attorney review or draft contracts “before the rain,” especially for dealings with customers, vendors, suppliers, banks, and landlords.

Since Hammurabi codified law with chisel and stone approximately 3,800 years ago, a simple contract or agreement – whether written or oral — is binding when key parts and concepts are present. A basic understanding of contract formation involves an offer, acceptance, mutual assent and the exchange of “consideration.” The courts interpret consideration very broadly, encompassing acts, promises to perform or refrain from actions, as well as promises to provide services, money or goods.

In my experience, problems and litigation often arise not from the main terms but from the small details specific to the type of agreement and business involved. Major issues occur because of
inadequate contract reviews, excessive trust, failure to foresee potential problems, reluctance to request changes, fear of upsetting the other party, and losing business, or denial about potential
problems.

Here are some tips derived from my years of litigation and drafting contracts:

• Approach contracts with caution, as they may not favor you and include protective language.
• Contracts often combine various templates, leading to confusion and contradictions that can cause significant problems in the future.
• Avoid reusing contracts from previous deals as they may not fit the current transaction or account for changes in law or circumstances.
• Lack of contract review and understanding can lead to unnecessary disputes.
• Both parties may read the contract and think they understand the terms but do not.
• Ensure the party signing the contract is authorized, and legal requirements are met, especially in situations involving multiple contracting departments.
• Unique terms, conditions or specifications may be overlooked (i.e., in a commercial lease your business needs a certain amount of parking spaces or a curbside-drop off location.)
• The best time to negotiate your terms is at the formation of the contract. You never want to leave something out and beg for a change later.
• The best time to negotiate a contract is when both sides want something and have something to give. Do not rely on the other’s charity.
• Know your business and what it requires to be successful so the terms in your contract advances, matches and protects those goals.
• Ask the other party for clarifications, changes or accommodations if you need them. (This is a good way to ascertain what is important to the other party and may give you insight as to
  leverage points that could be used to bargain for your terms.
• Have one person or team handle your contracts, so they will become in-house experts in the drafting and review of same.
• Limit who can contract and bind the company. (Not just the contracts for your work but also vendors who service your business.)
• Set a monetary exposure limit for contracts without legal representation or review. (Be sure to include legal fees and costs to defend or enforce the contract.)
• Insurance may not cover all issues. Also, a judgment may exceed your coverage.
• A fair-minded potential business partner will never question your desire for reasonable self protection and preservation of your business interests. (Be cautious of people who will not
  budge on reasonable changes to an agreement.)
• Ensure timely adherence to contract obligations by promptly calendaring deadlines upon execution. Additionally summarize and calendar key requirements at the time of execution,
  communicating these essential details to your team members to avoid a breach.
• Ensure your essential conditions, terms and requirements make into the contract pre-execution, so they are enforceable. (Do not ever place your faith in a verbal agreement to do, or not to do something.
• Everything you want or need in an agreement needs to be written into the contract or it basically does not exist.)
• Email and/or document all discussions (whether verbal or otherwise) while the contract is being negotiated and during the life of the contract.

A Cautionary Tale and Conclusion
The list above is not exhaustive but serves as a good starting point for approaching contracts. Consider contracts not just as guides for good times but as protective measures if the relationship sours.

A few years ago, I helped a client dealing with a legal dispute between their association and a construction contractor. Although they had other lawyers for the litigation, I served as their personal counsel for different matters. The problem arose from various agreements, including one with an “exclusivity agreement” that the contractor wanted to enforce. The association’s stance was that the exclusivity only applied to potential hurricane damage, for which they had previously hired the contractor. However, when they put out bids for other repairs two years later, choosing a different contractor, the original one claimed exclusivity for all work. The root issue might have been a falling out during the bidding process due to difficult personalities. The original contract, using the contractor’s form, was vague, and the association’s attorney wasn’t involved in drafting or reviewing it, leading the case to trial.

As the disagreement progressed, an association representative apologized to the contractor in an email, despite the association arguing in court that there was no such agreement or, if any, it
was solely for hurricane damage. Despite having insurance, the association had to pay a substantial sum or risk losing more at trial. With an estimated $1000-2000 in legal work during contract negotiations, the situation could have been avoided. The lesson is clear: preventive measures during the contract phase are invaluable. A transactional attorney’s role is to safeguard your business interests, anticipating potential harm in case of a business relationship breakdown. If such a breakdown occurs, a well-drafted contract can help swiftly and economically navigate the situation.

As we enter the New Year in this booming Florida business environment, I encourage you to consider having your contracts, forms and agreements professionally reviewed, drafted and negotiated by a skilled attorney to align with your business goals and ensure protection. With over 60 years of excellence and a team of over 230 attorneys throughout Florida and southern part of Alabama, Kubicki Draper offers a broad spectrum of business transaction legal services with the added benefit of also being business litigators should you have to pursue a remedy in court. Trust us for all your transaction needs, contract review or drafting, so you do not have to think about us when economical pre-suit options are off the table.

Frank is a seasoned attorney who can be reached 24/7 for consultation at 561-307-4533 on all of these matters.