October 5, 2006
"5 NO 5 EQUAL 1ST 60,000"
Posted by Jeff Lipshaw
In a previous post, I commented on Steven Schwarcz's Explaining the Value of Transactional Lawyering.
One of his survey data points was to compare the extent to which lawyering provides a road map for the parties versus protecting the client in future litigation.
Back in the days when I was down in the in-house trenches, our consumer products group sold large quantities of stuff to go on mass market retail shelves (the old "Plan-O-Gram"). I would get term sheets I was supposed to turn into contracts with phrases like the one in the title to this post. The grizzled old sales veteran would say to me, "now don't be putting this contract in a bunch of legalese." To which my response was usually, "no, first I think I will take a shot at English."
I thought I was adding value at the time; I'm less sure now.
Answer to the puzzle below the fold.
One of the means of competition in the brutal mass market consumer goods category (shampoo, toothpaste, whatever) was known as the "stock lift." Competitor A would simply buy up all of Competitor B's stuff and replace it on the shelves with Competitor A's stuff. In addition to the one-time payment for Competitor B stuff, the terms of payment for the initial load of Competitor A stuff, say $60,OOO worth (1ST 60,000), would be that customer would not have to make any payments for the first 5 months (5 NO) and then make five monthly payments of $12,000 (5 EQUAL). I've previously written on what I think is a myth of opportunism when there is a colorable ambiguity, but this is a case where I think I agree with Judge Posner that one makes a rational decision about whether making this clear to a third party (a judge) is really worth the upfront cost.
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Well, as the old adage goes "An ounce of prevention is worth a pound of cure" and from the cases that make it to the appelate level show us how true that is in the legal profession.
Translating to legalese may be overrated, and more courts are specifically stating localized rules saying NO legalese in briefs etc. However, the review process of contract, due diligence in deals, etc. is still critical (for the aforementioned adage).
The flip side of this is a small law firm I worked for who did a large amount of software licensing contracts. The lead counsel insisted on making loads of trivial changes to client contracts that probably had little if any value add. Somewhat proving my suspicion that this was counsel's technique, counsel harshly criticized my work for having not made enough changes or comments to the clauses. Otherwise there was little substance to the criticism.
full disclosure: I have singficantly less experience than the partner, however I had worked for 9 years in the software business, a large part of my later career as a buyer of various software licenses.
Posted by: Bob | Oct 5, 2006 11:04:08 AM