13 COSTLY MISTAKES WHEN NEGOTIATING CONTRACTS

By Fred Reilly, American Attorney and English Solicitor

The goal of the contract negotiation process is to produce a written document that addresses the relevant issues, terms, rights and obligations between two or more parties to the contract. Unfortunately, many negotiators make costly mistakes that ultimately come back to haunt them when a disagreement arises over how the contract should be interpreted or performed. This article will highlight thirteen common mistakes that could cost you a bundle.

1. Failure to define your negotiation strategy in advance. How can you effectively negotiate when you haven’t yet defined the purpose of your negotiation? Prior to entering negotiations, establish your objectives, identify possible points of contention, consider the impact of any time constraints and determine potential deal breakers. It’s also highly advisable to review your knowledge of the other party, their negotiator (your adversary’s style, tendencies and hot buttons) and the context in which the negotiation will take place (i.e., market conditions that impact the deal).
2. Failure to narrow the issues. After you’ve defined your negotiation strategy, address the issues that are crucial to your deal. During the negotiation, focus on resolving the key issues to your advantage or in a manner that you can live with after the deal has been struck. Be wary whenever your adversary focuses on minor or irrelevant points to the exclusion of the material issues. If it’s difficult to ever get to the substantive points, you’re in for a lengthy negotiation with an unacceptable outcome.
3. Failure to walk away. Some negotiators are afraid to say “No.” One of the soundest negotiation strategies is to reach the conclusion that no deal is better than a bad deal. If your adversary realizes that you are willing to break off negotiations and walk away, he is far more likely to negotiate in good faith and work towards an acceptable deal.
4. Failure to get a written document. Under most business circumstances, an oral contract will be enforceable. A notable exception is an oral real estate contract that violates the Statute of Frauds (which requires that certain contracts must be written). Although an oral contract may be enforceable, there’s always the evidentiary problem of how to prove the terms of the contract at a later date. One of the goals of your negotiation should be to generate a comprehensive written document that accurately describes the terms, rights and obligations of the parties in a manner that provides clarity about how the agreement will be interpreted and performed.
5. Blind reliance on a “standard contract.” When it comes to legal contracts, do not place blind reliance on a “standard contract.” Although standard contracts can be very useful, they simply do not fit every situation. People frequently want to use a “standard contract” because they don’t want to pay an attorney to draft a contract. This often results in a “penny wise and pound-foolish” scenario. Many of the standard contracts that you can purchase at an office supply store for a nominal amount are simply so vague that little protection is afforded and clarity is non-existent. Depending on your specific situation and the issues at stake in your contract, hiring an attorney to draft the contract may be the most cost-effective choice possible. As an alternative strategy, consider modifying a standard contract with specific provisions that closely fit your situation.
6. Failure to Properly Define the Parties. This mistake may seem elementary, but negotiators consistently get this one wrong. It is crucial to properly define the parties to a contract to ensure who will be liable for performing the obligations of the contract and liable in the event the contract is breached. You also need to ensure that the individual executing the contract has the appropriate authority to do so. For example, the President of a corporation will typically have authority to bind the corporation. Don’t be so certain that another officer within the corporation has the same authority to bind the corporation.
7. Using Inconsistent Terms. Once you’ve defined the parties, refer to them in a consistent manner throughout the contract. Do not refer to a “Buyer” in one provision and later refer to a “Purchaser.” Although seldom fatal, this mistake creates confusion and undermines the credibility of the contract. In some cases, this mistake may negatively impact how the contract will be interpreted.
8. The contract is not integrated. Whenever you cut and paste provisions from several model documents, there’s a danger that the new document will not be integrated. For example, references to subsequent provisions may be incorrect or the referenced provision may not even be present in the new document. No one wants a written contract with gaping holes.
9. Failure to get clarity on key issues. Clarity is extremely important when negotiating and drafting contracts. For example, a contract that requires one party to make payments to another party should clearly set forth the conditions that must be met to trigger the payment obligation. If the triggers (conditions) in the written contract are drafted in an ambiguous or vague manner, the payor could assert that the payment obligation has not yet arisen. Thus, this situation could ultimately leave the payee with no choice but to initiate a lawsuit to enforce the terms of the contract.
10. Failure to define those events that constitute breach of the contract. Like the triggers (conditions) mentioned above, it is important to define the specific events that constitute breach. Both parties need to establish the bright line between acceptable performance and unacceptable performance.
11. Failure to include safety-valve provisions. Since the parties have recognized the possibility that a breach may occur, it is highly advisable to contemplate a contractual provision that provides for a “cooling off” period during which they can attempt to resolve the conflict. This type of provision tempers a hothead’s tendency to dig in their heels and immediately initiate legal proceedings.
12. Failure to include a dispute resolution procedure. For many business transactions, mediation and arbitration represent viable dispute resolution procedures and should be considered when drafting the contract. It is imperative to define the procedure to be followed and especially how the mediator(s)/arbitrator(s) will be selected.
13. Failure to designate the applicable law and choice of forum. This common mistake is often simply overlooked. The applicable law governing the contract should be clearly stated. The choice of forum provision establishes the location where disputes will be adjudicated. Obviously, hostile and inconvenient forums should be avoided.

Avoiding these common mistakes will not eliminate all potential problems associated with a contract, but will substantially diminish the likelihood of a later dispute over interpretation or performance.

DISCLAIMER: This article and its content are intended to provide general information on legal topics and shall not serve as a solicitation for services in any jurisdiction where prohibited by law. This article is not, nor is it intended to be used as a substitute for legal advice. You should consult an attorney for individual advice concerning your own situation. Sending an email to the owner of this website, and receiving any response thereto, does not, in and of itself, create an attorney-client relationship.

© Copyright 2007 by Fred Reilly. All rights reserved.

9 WAYS TO SLASH YOUR EXPOSURE TO LAWSUITS

By Fred Reilly, American Attorney and English Solicitor

For most Plaintiffs and Defendants, lawsuits quickly become nightmares. But it doesn’t stop there. Lawsuits have become so commonplace, that the threat of litigation casts an exceptionally dark cloud over people. Once you become embroiled in litigation, the process takes on a life of their own and tends to drag on forever – depleting assets and sapping your energy to move forward. Like a cancer patient whose life depends on the next doctor’s appointment, the litigant’s life revolves around the next motion, deposition, hearing and appointment with their counsel.

The purpose of this article is to provide you with nine specific precautions you can take to reduce your exposure to future lawsuits. By no means is this article a silver bullet. But the points discussed below should provide insight into specific action that can decrease the threat of future litigation.

1. Negotiate clarity. Many civil lawsuits are the result of one or both parties failing to adequately achieve clarity in their contractual negotiations. Without clarity, it’s understandable that rationale people could reach different conclusions in their interpretation of rights and obligations and how such rights and obligations should be performed. Notice my choice of words -  “rationale people.” In today’s world, there are many irrational people and it’s even more crucial to achieve clarity when you’re dealing with an individual who may become unreasonable, combative or belligerent if there’s the slightest provocation.
2. Don’t commit when you can’t comply. I realize that this point is incredibly obvious, but I’ve seen it time and again. Most civil lawsuits are the result of “promises made and promises broken.” If you never make the promise in the first place, it’s generally difficult to penalize you for not performing it.
3. Mitigate. If you realize in advance that you cannot fulfill an obligation, take action to mitigate the impact of your inability to perform. Mitigation can substantially decrease your exposure to damages because it forces the other party to take stock of their own position. Don’t be an ostrich and hide your head in the sand – the problem rarely disappears on its own. It only gets worse.
4. Document problems (with one very important caution). Many lawsuits are swearing matches – the only evidence submitted is the testimony of witnesses. In these types of cases, the parties didn’t commit their legal positions to writing and the merits of the case are largely decided by the judge’s assessment of the credibility and consistency of the witness testimony. By documenting a problem, you produce a paper trail that can be extremely helpful when a dispute is being litigating. Documenting a problem comes with one very important caution – there is a significant risk that you may inadvertently compromise your position, make an admission or otherwise undermine your legal position. That’s why it is very important to consult an attorney before taking any action that may negatively impact your case in the event that litigation is necessary to resolve your dispute.
5. Email communications. As an attorney, I’m very mindful of the countless ways in which clients unwittingly undermine their own position through their email communications. Let’s face it, the Internet makes it easy to communicate and we’ve grown accustomed to firing off an email reply via a Blackberry or some other form of PDA – it’s convenient, responsive and can be devastating evidence later in the event of litigation. I advise clients to be very careful about the content of their communications, but especially emails which can be taken out of context with great ease.
6. Alternative dispute resolution. Litigation through the judicial system is not the only option for resolving a dispute. If you enter a relationship or transaction that is likely to end in a dispute, consider the merits of including a mediation or arbitration provision into your agreement. Although these alternative dispute resolution methods don’t necessarily fit all circumstances, they are ideal for situations where the parties want to avoid the lengthy procedural delays and public scrutiny that occur when disputes are litigated in the court system.
7. Include an attorney fees and costs provision in contracts. A certain degree of deterrence can be achieved by the inclusion of a contractual provision that requires the losing party in litigation to pay for the prevailing party’s attorney fees and costs. Most people don’t want to pay one attorney, much less two. This provision forces a potential litigant to address the merits of their case and the possibility they may not prevail.
8. Address problems without delay. Many civil lawsuits are the result of the Plaintiff reaching the conclusion that the Defendant is unwilling to address a legal problem. When a lawsuit is filed, litigants dig in their heels and seek vindication. Left unresolved minor problems have an amazing tendency to become major problems. Take the responsibility to initiate action to solve your own legal problems at the earliest possible time.
9. Get preventative legal advice. This recommendation may appear self-serving, but it is certainly not intended to be. No doubt you’ve heard the phrase “the best defense is a great offense.” As an attorney and Solicitor, I can honestly say that I’m in a far better position to reduce or eliminate a client’s legal problem if they seek my advice long before litigation is ever initiated. Lock the barn door before the horse leaves, not afterwards. No one likes uncertainty. If you’ve ever been involved in litigation, you no doubt recall the lengthy periods of uncertainty. Obtaining legal advice when a problem first arises is important for another reason – the client will know where they stand, can better evaluate the risks and has more flexibility to fashion a reasonable resolution they can accept. Finally, preventative legal advice helps to reduce the acute anxiety that’s associated with nightmares.

DISCLAIMER: This article and its content are intended to provide general information on legal topics and shall not serve as a solicitation for services in any jurisdiction where prohibited by law. This article is not, nor is it intended to be used as a substitute for legal advice. You should consult an attorney for individual advice concerning your own situation. Sending an email to the owner of this website, and receiving any response thereto, does not, in and of itself, create an attorney-client relationship.

© Copyright 2007 by Fred Reilly. All rights reserved.

13 SECRETS FOR PRESENTING YOUR CASE TO A GOVERNMENT TRIBUNAL, BOARD OR LEGISLATIVE BODY

By Fred Reilly, American Attorney and English Solicitor

During my career, I’ve served as an administrative hearing officer, legal counsel to municipal boards, municipal attorney and counsel to clients appearing before government tribunals, boards and legislative bodies. This article chronicles some of my presentation strategies honed over the past twenty years.

1. Understand the decision-making process. For most inexperienced people who appear before a tribunal, board or legislative body, the decision-making process is a blur. Before they know what just happened, their case has been decided and the next case is called. Your objective in presenting your case is either to present a viable solution to a problem or request specific relief. To be effective, you must understand how the tribunal, board or legislative body will make the decision in your case. Who makes the decisions? What is the decision-making process? How have similar cases been handled in the past? Is your case new, novel or controversial?
2. Dress in an appropriate manner. Respect the authority and decorum of the proceeding by dressing in an appropriate manner. If you mean business, dress like you mean business. I recommend that you avoid flashy, loud or controversial clothing – anything that could conceivably detract from the important message that you want to deliver.
3. Deliver a comprehensive presentation. Create a presentation that will inform the decision-maker(s), apply the applicable standards to the facts of your case and will logically lead to the compelling resolution you desire. Rather than discuss the advantages and disadvantages of handouts, visual aids, expert witnesses, advocacy, etc., let me simply recommend that you strive for clarity. I like to say that “I have a simple story to tell” and then tell it.
4. Present a written document? It is far beyond the scope of this article to address the format or content of a written document to be presented to the decision-maker(s). I will make two points. First, ensure that any document is consistent with your presentation strategy. People always have a knack for identifying inconsistencies and exploiting them. Second, be careful about how you distribute a written document to a tribunal, board or legislative body. Avoid giving your adversary any advantage by releasing the document too soon. Don’t allow the decision-maker(s) to lose focus on your presentation because they’re busy trying to read the document.
5. Have complete command of the standards. In making its decision, the tribunal, board or legislative body must apply a set a standards to the merits of the case. These standards are the laws or regulations applicable to your case. I highly recommend that you obtain a copy of the standards and fully understand how they will be applied. An advocate who doesn’t understand the applicable laws or regulations in his case is at the mercy of his adversary who likely deals with these same standards on a daily basis.
6. Follow the procedure. Every tribunal, board and legislative body has a set of procedural rules that govern how a case should be presented. The procedural rules are in place to ensure orderly proceedings, due process of law and just decisions. The rules can very from informal (administrative board) to very formal (judicial proceeding). Obtain a copy of the procedural rules before you begin to formulate your presentation. In addition, if you’ve never witnessed a case being presented, I highly recommend that you observe the presentation of several cases long before you ever present your own. Do not rely on Boston Legal, The Judge Judy Show or the televised Anna Nicole Smith proceedings for any pointers on how to present your case. Following these examples is one of the fastest ways to ensure that your case will be rejected.
7. Be diplomatic. There are times when you must play hardball, but not all the time. I recommend that you be diplomatic whenever possible. If you always adopt a “take no prisoners” attitude, you run the distinct risk of alienating the decision-maker(s).
8. Address the merits of your case and avoid personality issues. The body of your presentation should focus on the merits of your case. I purposely refrain from injecting personalities into the process in most circumstances. Instead of indicting individuals involved with the problem or the decision-maker(s), pay attention to how the standards apply to the facts of your case.
9. Present evidence for your position. I realize that this point is obvious, but I’ve personally witnessed many advocates who failed present any tangible evidence that supported their position. Usually, they didn’t understand either the applicable standards or the procedure. There’s an old adage among litigators – “you’ve got to give the judge something to hang his hat on.”
10. Acknowledge your weaknesses. The fastest way to undermine your own credibility is to assert that your position is 1,000 percent correct and your adversary is 1,000 incorrect. Inexperienced advocates constantly attempt this ruse. It never works because any seasoned decision-maker has seen this maneuver countless times. The decision-maker recognizes that each party’s case will likely have both pros and cons. If you fail to acknowledge your weaknesses, you empower your adversary to point them out with impunity and imply (or claim) that you have not been honest with the decision-maker. Rather than allowing yourself to be in this precarious position, I highly recommend that you acknowledge the weaknesses of your case and provide a rationale explanation for each. At the least, you remove your adversary’s ability to assert dishonesty.
11. Anticipate gray areas. Unless you’ve missed an obvious or fundamental point, there’s little shame is admitting that you don’t have all the answers. Gray areas exist. Anticipate them whenever possible and formulate an appropriate response in advance.
12. Don’t go on tangents. The decision-making process is always challenging. Do not make it more difficult by embarking on a tangent that distracts the decision-maker(s) from the merits of your case and the resolution that you seek. Similarly, don’t allow your adversary or anyone else to highjack the debate or cloud the relevant issues in your case. Successful advocacy requires focus and discipline.
13. Present a viable solution or request specific relief. It is shocking how often people completely bungle this point. Most people don’t know how to ask, so they effectively defer to the judgment (or mercy) of the decision-maker to make the decision. If your presentation is well structured, the merits of your case will lead to a logical outcome. At the strategic phase of this process, determine your desired outcome and then work backwards to build logical steps for achieving it. Strive for logic and consistency. If you’re presenting a solution to a problem, make it rationale – explain why your solution addresses the most important issues relevant to the problem. If you are seeking relief (i.e., reduction of an administrative fine), request specific relief such as asking the tribunal to “reduce the lien from $_____ to $____ provided that you pay the fine within ___ days.” Above all, this is the time to advocate in a compelling manner.
14. Ask your questions. Always offer the opportunity to clarify any points that may help the decision-maker(s) reach a sound conclusion.

DISCLAIMER: This article and its content are intended to provide general information on legal topics and shall not serve as a solicitation for services in any jurisdiction where prohibited by law. This article is not, nor is it intended to be used as a substitute for legal advice. You should consult an attorney for individual advice concerning your own situation. Sending an email to the owner of this website, and receiving any response thereto, does not, in and of itself, create an attorney-client relationship.

© Copyright 2007 by Fred Reilly. All rights reserved.