What is a contract?

Posted 27 Apr 2002 at 13:06 UTC by dancer Share This

[An inconstantly emphasised discussion of contracts, with the geek in mind]

A contract is a written agreement where all parties list their obligations and expectations in simple, declarative sentences in plain and unambiguous language.

A good contract is a win-win deal. It must pass three basic tests...

1. Everyone gets what they want out of it.
2. Everyone is assured of equal measures of protection should the other party or parties fail to meet their obligations (through malice, incompetence, or simple circumstance)
3. It should be as simple as possible, and unambiguous.

Never deal with companies that refuse to negotiate their contracts. This probably indicates a breach of (1) and possibly also (2). Unwillingness to negotiate a contract 'as a matter of policy' means they are thinking about themselves, and not you. You're thinking of them, right? If you're not being unreasonable, then there's no reason not to at least figure out where the middle-ground might be, even if you or they decide that it's inadequate. People who won't even consider contractual modifications are not worth the trouble of dealing with.

Consider being suspicious if the person asking you to sign it hasn't read it themselves (I'd like to say that that was an uncommon situation, but it isn't). I feel that it should go without saying that you should read it through as well. More on that in a minute. In many cases, companies inherit contracts when a pet lawyer or executive joins the company, bringing some contract with them from a previous workplace. That contract itself may be from yet another workplace previously. While the odd clause may have been added or removed, it's possible that few people have ever read the thing the whole way through. Having seen quite a few contracts over the years, I'm convinced that there's less than a hundred of them roaming around, and some probably date back to Alexander of Macedon.

(It's kind of disconcerting to discover that your contract to write software signs over the intellectual property rights for any stock embryos, or medicinal drugs developed during the course of your contract. Face it...nobody cared enough to read the contract before they handed it to you to sign, so it's just failed the second test. It probably doesn't protect you)

Dealing with it

So, you're handed a contract. What do you do? You read it! Contracts come with a glossary of terms embedded. Check it. Read through clause by clause. If any term is ambiguous, ask what it means in the context of the contract, and then pencil it into the glossary. These are not sacred commandments graven in stone...they describe what you are agreeing to do, and what you get for doing it, and what recourse you have if you are screwed around or things go bad. Remember test (1). If it doesn't suit both parties, then neither of you should sign it!

Once we have the definitions out of the way, look for sloppy and unclear language. If you need a lawyer to read a clause, ask what it means, then cross it out and pencil in the same thing in simple, unambiguous terms.

Next, once things are clear, hand it back. This is where the contract is disambiguated. It's a clear statement. It may not be the right statement, but that's coming up. More than once, I've shocked the person across the table by restating sections of their contract in simple, understandable english, and they've then realised that either I (or they) would have to be idiots to agree to the terms that the contract states. Until they see their own contracts in plain language, many people who have read them (and occasionally had a hand in writing them) have not understood them.

We're down to the wire. We've disambiguated the contract, and agreed to a common definition of the terms. Now cross out anything you absolutely will NOT agree to. Propose alternatives. Negotiate. Meet in the middle. Come to an understanding. If you can't, then you can shake hands and walk away. You and they would not have been happy doing business together anyway. If you can come to mutually agreeable terms, then great! You've got a contract! It'll only take a few minutes to type up and print the changes. Usually it takes less time than it takes to tell you how much of a hassle it is to do.

A contract doesn't force a party to do anything they don't want to do. That's what the courts and the law are for. A breached contract expedites the legal process (the more so if it's a clear and fair contract), but you've got to be willing to go that far. If a party does not want to honour an agreement, then they WON'T, and a piece of paper called a contract will NOT compell them to do so. A dishonourable party that you cannot take legal action against has nothing to fear from you but your word. In geek circles, bad PR travels pretty damn far, but it may not be far enough.

So, remember:
1. Everyone wins. Everyone gets what they want, feels good and warm and fuzzy, and rides off into the sunset at the end of the day.
2. Everyone is protected. Every industry and every business can suffer reversals or go sour. You can run into rabid middle-managers who don't like your haircut/dog/gender/aura/competency/quantum-wave-function who will insanely try to block your ability to do your job (or to recieve your listed compensation for it) at every turn. The other party may simply decide to do something else, and try to wriggle out. You have to have as much protection as they do. They have to have as much as you. Ask the person across the table: "Why does this protect you from a breach and not me? That doesn't seem very fair, does it?"
3. Simple and unambiguous. You can sacrifice some of the former for the latter, but if it can't be said fairly simply, maybe it shouldn't be said at all....Or needs to be said in more clauses. Sometimes you have to list a series of steps (like a program) to describe - say - dispute resolution. Better to have 30 little clauses in order, than a compound sentence with badly blocked semicolons. If it can mean more than one thing, you can be guaranteed that it will!

What's missing?, posted 27 Apr 2002 at 15:44 UTC by jooon » (Journeyer)

The few times I have been handed a contract most stuff have been ok, and after asking what some sentences mean, I sign. Just going through the contract and cross out, and make things clear and unambigious is pretty easy. The hardest part for me is to see what is missing. But I guess that is point 1 and 2, to make sure both parties get ALL things they want and have protection.

Contracts Can be Oral, Not Written, posted 28 Apr 2002 at 05:19 UTC by goingware » (Master)

In many parts of the U.S. at least, a contract exists if both parties think they have a contract. A contract can be an oral agreement with nothing written down. It is just as binding as a written contract, and can be used to sue somebody if they break the contract.

The disadvantage of course is that the other party may claim that what you state the contract was, isn't what he agreed to. That's why it's important to have written contracts, it is an evidentiary record of what the contract is in the event there is a dispute. But don't for a minute think that not signing anything means you don't have a contract - it is the agreement, not the document, that makes a contract.

Re: Contracts Can be Oral, Not Written,, posted 29 Apr 2002 at 13:41 UTC by lukeg » (Master)

The disadvantage of course is that the other party may claim that what you state the contract was, isn't what he agreed to.

Hence the saying, "Verbal contracts aren't worth the paper they're written on."

written contract - marriage, posted 29 Apr 2002 at 17:45 UTC by sye » (Journeyer)

when marriage became customarily a written contract protected and enforced by civil court instead of both parties laid down their faith before village elders, values of love and family shifted -> accordingly -> Oral contract of love, explicit and implicit 'affairs' challenge the written contract all the time due to the fact that oral means of communication is much more engaging than the written laws.

Thanks for an excellent study of contracts, posted 30 Apr 2002 at 16:50 UTC by Alleluia » (Journeyer)

I read EULAs and contracts whenever I can; wish I could read every single one, but I do read many.

I read them for the same reasons as the author of this article--to see what the legal competencies of the company are. I must admit that Microsoft consistently has the most diverse contracts emitting from a single source. They really do work hard on their contracts, and few of them are 'boilerplated' (cut-n-paste from a template).

Some contracts are even funny. Most contracts are a short legalese summary of the problems a company has encountered in the past--and now they're trying to protect themselves. The ZEND contract (included with their studio) I recently read was one of the most legalistic I ever saw, extremely comprehensive.


I don't have a problem with a company limiting their liabilities with extreme detail. I personally have a policy of managing my own problems, ie, once I own it except for an extreme problem, I solve the problem myself, rather than resorting to legal channels and blaming someone else. What I have a problem with is a contract that LIMITS me from using software (or a product) from reasonable uses. Microsoft is good for that kind of contract, and getting moreso. The GNU license, for example, does not limit me from using the software, but it does demand that IF I use it in certain manners, THEN I must also make source code available. This is a really exciting use of contract, and I think Microsoft does the opposite, when for example they frankly say "You cannot use our software with SAMBA" (in legalese).

Information wants to be free.

too long to fit all the details, but..., posted 30 Apr 2002 at 19:03 UTC by bstpierre » (Journeyer)

An agreement isn't a contract unless it meets five criteria:

1. offer -- First one party or the other must offer an agreement.

2. acceptance -- After an offer has been made, the second party must accept the offer.

3. consideration -- A contract must be supported by consideration. Each party must get something and give something (this is stated crudely, but you get the point). There are (several) rules about what does and does not constitute consideration.

4. capacity -- You must have the legal capacity to form contracts. Minors and the mentally retarded or insane do not have the capacity to form contracts. I believe that this is also where duress fits in; contracts formed under duress (threat of harm to you or your loved ones) are not valid.

5. legality -- The subject matter of an agreement must be legal. An agreement isn't legal if it is against statutory law or public policy (among other things). So price fixing agreements are not contracts, certain types of non-competition agreements are not contracts, and certain types of non-disclosure agreements are not contracts.

In general (yes, there are exceptions), if an agreement isn't a contract (i.e. if it doesn't meet all 5 requirements), it won't be enforced by the courts. Beware, though, that many contracts are written with a severability clause. This means that it any provision of the contract is found to be invalid, the rest of the contract will still be valid and enforceable. (So your employment contract's provisions about non-competition might get squashed, but the patent assignment and non- disclosure pieces will still stand.)

Hope this (non-thorough and VERY non-rigorous) introduction (by a non- lawyer) helps!

set of Contracts->??<-God's Covenant in the Bible , posted 3 May 2002 at 15:09 UTC by badvogato » (Master)

read "Broken Covenant - American Foreign Policy and the Crisis Between the U.S. and Israel" by Moshe Arens ISBN 0-671-86964-7. It will help you to find answers you may be looking for, mainly the functions/procedures/methods you have to go through your mind to make a judgement that someone has broken a bilateral contract yet God has always kept HIS unilateral Covenant to HIS people according to the Bible. If you can write your OWN Bible, how do you solve the problem of contracts?

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