Better Than Back-Of-The-Napkin: Why Lawyers Write Such Long Contracts

Unless you are paying your lawyer per word they write, your lawyer probably isn’t including a whole lot of extra terms in your contract for the purpose of billing you more.

Often, there are two terms in the contract, which are the most important to you: “the Supplier is going to provide me with Product or Service X” and “I am going to pay the Supplier Y dollars for it”.  This is “back-of-the-napkin” territory, which, sometimes, works out for everyone involved. 

The problem with lawyers is that we are paid to know about all of the things that can go wrong.  It is where we operate. We strive to try to protect our clients. We don’t just want to close the deal, but rather, to get you the best deal possible. So bear with us, we really do have your success at the forefront of our minds.

Important Terms

Some of the most important terms to include in a contract are, as follows:

  • The Why: Often lawyers put the “why” of a contract in the beginning paragraphs of a contract (“the recitals”). Sometimes, the “why” is very important, because it places the contract in context. When a contractual clause is not clear to everyone, knowing the context in which the contract was made can be helpful in deciphering meaning.
  • The Who: We call this the “parties”. It is essential to get this part right, because it needs to be clear in the contract who exactly has legal obligations under it. If you think that you are dealing with an individual, but a corporate name appears on the final contract, you might want to include personal obligations, relating to that individual, in the contract as well.
  • The What: This is often where the back-of-the-napkin agreement lacks the details necessary to make it legally binding. There must be a true “meeting of the minds” in order to have an enforceable contract. Broad obligations help establish the general parameters for the contract, but the devil is almost always in the details. Let lawyers be fanatical with precision in this part of the contract, if possible, because common expectations are one of the best ways to ensure success in a relationship.
  • The When: Time matters. When is a product or service going to be delivered? How long does the contract last for? When will payment happen?
  • The Where: This may or may not be crucial to a contract; however, if the “where” matters, it needs to be set out explicitly to document the common expectation of the parties.

The Terms Everyone Forgets

  • Termination: If you take only one thing away from this post, please remember that all contracts need a termination clause. This is one area where ambiguity is (usually) a terrible idea. You need to specify the circumstances under which the contract can end and how much notice each party needs to provide to the other. You also need to specify what the financial consequences are if the contract is terminated early. If you don’t agree to this in advance, and the contract terminates early, you can expect disagreement.
  • Confidentiality: Except in specific situations, being in a contract with someone doesn’t automatically mean that everything that you learn about the other party and their business, while you are working with them, is confidential. If you are exposing sensitive business information to a contracting partner, such as business processes, or client and contact lists, then you need to specify that all of this information is confidential. You might even want the terms of your contract to be confidential.
  • Non-Solicitation: If you are concerned about the confidentiality of your business information, you may also be concerned about your contracting partner being able to take advantage of the relationships that you exposed them to during the course of the contract. If your contracting partner has the ability to take business away from you, then you should include a term in the contract that restricts this and places financial consequences on it.

How Momentum Can Help

Momentum can draft clear and comprehensive contracts for you. We can also review and revise your existing contracts and templates. Finally, Momentum is always available to provide independent legal advice in order to ensure that your interests are being adequately protected in your contractual relationships.