The attorney looked at the audience and said, “Make sure you understand everything in your agreements. If there are any ambiguities, they will come back on you, not your attorney.” This was many years ago when said attorney and I were on a panel together.
Wise words, aren’t they? I will never forget them. I thought of this the other day when an exit planning client told me about a dispute over a distribution agreement with another company. And, it seems the other party also ignored this advice, thus a mess.
Without giving away any details, my client signed an agreement that gives the other side an out. The other party signed it including a clause that gives additional control to my client. How does this happen you may ask? Here’s how.
- My client got to the point where he told his lawyer he didn’t want to spend any more money on legal fees. The lawyer had mentioned the out clause, but the client was mentally more concerned with fees than anything else. However, the lawyer should have said something like, “There’s no charge for this conversation as you need to realize the other side can get out of the agreement at any time, leaving you with expenses and no recourse.”
- The other party said, when it was pointed out there was a clause giving my client ownership of the brand (versus distribution rights), “An employee of ours put that in there and we didn’t notice it.”
In both cases, not paying attention to the details, not noticing ambiguity, and being cost conscious versus results conscious. In the buy-sell world there are more details, more intricacies, and lot more words to read and understand than in the above example.
In all cases, don’t ignore the advice above.
“A little alarm now and then keeps life from stagnation.” (Author) Fanny Burney