Break The Code

It Ain't My Fault

As a general rule, when it comes to making deals, the less you're legally responsible for, the better. Thus, if the other party has leverage, he or she will sell you goods "as is," have you enter the premises "at your own risk," and saturate contracts with disclaimers.

The most celebrated of exculpatory clauses is the indemnity. Among other things, it offers protection from third-party lawsuits. In other words, if you've agreed to indemnify me and I'm sued by someone else because of the deal I just cut with you, you must pay a lawyer to defend me, as well as pay any judgment should I lose. Lawyers love to negotiate indemnity clauses. Who controls the lawsuit? What if you want to settle and I don't? Despite all the haggling, an insurance policy often takes care of the problem. Courts like the idea of contribution--each party bears a proportionate share based on relative fault.

A notice clause lays out exactly how the parties will exchange formal communications, including where, when and how to send them, when they're effective, who gets copies, which ones can be verbal, and so on. Although notice clauses are not intended to be exculpatory, they can be used that way. Send a notice without scrupulously following the letter of the contract, and the other party may scream, "Foul!" Sound crazy? Maybe. But the other side may blow enough smoke to get themselves off the hook, especially if they can argue that your improper notice put them at some disadvantage.

In our next issue, find out about specific clauses that give you the upper hand if your deal goes bad.

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