Recently, I was reading J.R.R. Tolkien’s The Hobbit and I came across a nice little contract hidden in its pages:
Thorin and Company to Burglar Bilbo greeting!
For your hospitality our sincerest thanks, and for your offer of professional assistance our grateful acceptance. Terms: cash on delivery, up to and not exceeding one fourteenth of total profits (if any); all traveling expenses guaranteed in any event; funeral expenses to be defrayed by us or our representatives, if occasion arises and the matter is not otherwise arranged for.
Thinking it unnecessary to disturb your esteemed repose, we have proceeded in advance to make requisite preparations, and shall await your respected person at the Green Dragon Inn, Bywater, at II a.m. sharp. Trusting that you will be punctual.
We have the honour to remain
Thorin & Co.
For anyone who has not read The Hobbit or watched the movies recently, this letter outlined Thorin’s and his 12 companions’ (who all happen to be dwarves) terms for Bilbo (a hobbit) to join them on adventure to reclaim the lost treasure of the dwarves and to defeat the Dragon Smaug.
Putting aside the fantasy tale of dragons, dwarves, and hobbits, in just a couple of lines, Thorin’s letter outlines all the main points of their agreement. Bilbo is to act as a burglar on a quest, he can expect up to 1/14 of the profits, his travel expenses will be covered, and if he perishes along the journey, his funeral expenses will be taken care.
This is an example of a contract at its most basic and the idea of simplifying a contract down to its bare minimum is essential. Barring agreements where important sums are in play, your main goal with any contract is for each of the parties to actually understand what is being agreed to. Too often, contracts are overly complex and unintelligible for those who are actually agreeing to their terms. They are written for “lawyer’s eyes only” as lawyers are the only ones who actually understand them.
I remember being approached several years ago by two individuals starting out in business for the first time who wanted me to review a partnership agreement which they had prepared. The contract was based on a template which they found online. There is nothing wrong with using online agreement templates; many are actually very well done. That being said, the problem is that you don’t always understand all of the terms and language used in those model contracts.
For this particular partnership agreement, the issue was that neither of these two people actually understood their own proposed contract. It goes without saying that you are only asking for trouble if all the parties to an agreement don’t understand what they are actually agreeing to as a disagreement will likely arise in the future over this misunderstanding.
Your goal therefore is to make sure that you actually understand all of the terms of your agreements by simplifying them and focusing on the most important mechanics rather than bloating the contract with boilerplate such as “enurement” clauses.
This is where smooching your contract comes in. KISS is an acronym which stands for Keep It Simple, Stupid.
Figure out what the actual agreement is and then try to write out on a napkin. If you’re able to compress it down to this point, you actually understand what the main terms are and then a little boilerplate can be added on top of that (for example, “it is the desire of all the parties that the agreement be drafted in the English language only” to avoid running afoul of the Quebec language laws).
Here are some questions which can guide you in preparing and reviewing any agreement:
- What does each of the parties have to do?
- How are the payment amounts calculated and when are they payable?
- What happens if one of the parties doesn’t do what it is supposed to do?
- How long will the contract be in force and how can it be renewed?
- How can the contract be terminated? and
- Are there any lingering obligations after the contract’s termination?
If you can figure out the answers to all these questions, you’re on your merry way to a solid agreement which should hopefully greatly reduce the odds of a dispute arising in the future. Now off you go to defeat the dragon… good luck.