CONTRACTS PART I: Are your contracts ambiguous?
We've all been there... written something, reviewed it more than three times and it just looks right to you. In many situations, it may not be. Most business owners feel very accomplished when they put their agreements in writing without the assistance of counsel. Unfortunately, that accomplished feeling will quickly flee when they realize that major defects are present in their agreement because they didn't take the time to seek the advice of counsel or pay a few hundred dollars for a review to be sure.
One main issue with drafting contracts without the assistance of counsel is that your agreement can be very ambiguous, allowing the other party to argue that the agreement actually meant something completely different that what you know it meant.
In Illinois, and most states, when a contract is ambiguous, the courts will allow the parties to look at conduct of the parties, documents, statements to shed light on the written agreement and what the parties meant when they entered the agreement. This is great, however, it's the extra step and headache that you have to take by failing to seek the advice of counsel.
This past September 2019, I had a jury trial centered around these very issues. My clients entered a promissory agreement asking to be repaid for monies they loaned two friends when certain conditions occurred. A condition is something that can be required to happen before a party is required to act pursuant to the agreement (Condition Precedent), or it can be something that happens requiring a party to act after that condition has occurred/happened (Condition Subsequent).
In my case, my clients had entered an agreement with a condition precedent being that my clients would pay certain monies before the Defendants would be required to act. However, they also agreed upon how and when those monies would be paid. When those conditions occurred for payment, the Defendants failed to pay up.
Their counsel argued that the agreement was in fact ambiguous but failed to plead it as an affirmative defense. Nonetheless, when we looked outside the agreement and provided emails that spoke to the language in the agreement, communications between the parties, and the hardship of fees paid my clients, a jury concluded that the agreement was not ambiguous and thus, the Defendants had breached the agreement.
Although my clients are excited and happy that we won the jury trial, it took 2.5 years to get to that point. Had they allowed counsel to review the agreement before signing, suggestions could have been provided that possibly would have persuaded the Defendants to settle earlier on instead of trying to fight it. Remember, a few hundred dollars for review is better than spending upwards of $10,000.00 just to tell someone that they owe you money.
As your Business Lawyer, we specialize in helping you review, draft and negotiate these stringent rigors of contract law and we’ll assist you in establishing a solid Business foundation for your company. Contact us today to schedule a Business Protection Evaluation Startup Session.
This article is a service of SL DeBarros Law Firm, LLC. We offer a wide array of business legal services and can help you make the wisest business choices throughout life and in the event of your death. We also offer a Business Protection Start-Up Session or a Business Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.