Carefully Drafted Contracts Avoid Lawsuits (and usually win them when they don't)

Along with representing my clients in the Pittsburgh area, my legal services occasionally include the opportunity to serve as an arbitrator on various arbitration panels in the Pittsburgh area. For those of you who are not familiar with arbitration, the general premise is that three impartial lawyers sit on a panel, playing both judge and jury, and decide a legal dispute.

While many lawyers dread serving on a panel, I've always enjoyed the opportunity to "play judge" as an arbitrator because it provides me with the chance to observe litigation from a unique angle for many attorneys: that of the fact finder.

The majority of cases that I've arbitrated to date are contract disputes between two small businesses or between a service business and a consumer. And I'm always terrified to see how many small businesses are doing business with horrifically drafted contracts or (suprisingly often) no written contract at all. These cases are almost always the ones that make it to trial or arbitration as opposed to settling, because neither party really knows where they stand legally pursuant to the contract, and neither party wants to concede its position. In cases like these, many times the arbitrators are left to decide the case on a "he-said-she-said" credibility determination or, worse yet, on a "what does 'is' mean" analysis, where the contract is so terribly ambiguous that we can do nothing more than guess as to the intended meaning of terms. These cases are essentially coin flips for the litigants, where, unable to form an opinion on a more rational basis, the arbitrators' moods or personal opinions will come into play.

And while someone will win the coin flip, there are no winners in this type of litigation. Both parties will have incurred legal bills that they would have rather avoided. Both parties will have dealt with the uncertainty in their accounts books for the duration of the litigation. And the companies' employees' time will have been wasted at depositions, trials, or arbitration hearings.

Contract litigation does not NEED to be an inevitable cost of doing business. Instead, it can be avoided by carefully drafted contracts that reflect the parties negotations and a mutual understanding of the terms settled upon during these negotiations.

The next time your business, no matter how small, needs to enter into a contract, HIRE A LAWYER TO DRAFT THE CONTRACT! Consider these points:

* Lawyers know what questions to ask and what outcomes should be considered. They understand what protections the law provides each party and know how to draft the contract to provide or waive these protections.

* It will cost you less in the long term to hire a lawyer to draft your contract! A lawyer will generally bill disproportionately fewer hours in drafting a contract than he will in litigating a dispute arising from it. And, when the parties KNOW concretely what happens pursuant to a contract when certain conditions occur, then they are exponentially less likely to sue one another when a certain condition occurs. They can read the contract and, when it was well drafted, they each know where they stand in relation to one another.

* Lawyers have drafted contracts in the past and they probably can draft this one quickly based on that experience. Not only does this mean that they won't bill you nearly as many hours as you may expect (i.e. it's cheaper than you'd expect), it also means that they will take far less time than you will in attempting to draft your contract. Focus your time and attention on what you do best, managing a business. Allow your lawyer to do your legal work.

* Allow lawyers to take the blame in negotiations! Many small or family businesses are too concerned that they will look "untrustworthy" or "aggressive" if they ask for a written contract. This is CRAZY! Contracts PROTECT relationships; they don't destroy them. Everyone should be on the same page in any business deal. And, if you feel uncomfortable asking for a specific provision, allow your lawyer to negotiate for it. Your customer or vendor can blame your request on your evil lawyer, and won't think any less of you for it.

As always, if you or your Pittsburgh business has a legal question regarding contracts, don't hesitate to contact me for a free consultation. (412) 246-2023

Peter H. Kurzweg, Esq.