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Growth Strategies

It's All Talk

You don't have to tear your hair out every time you read a contract that's chock-full of legalese.
Magazine Contributor
3 min read

This story appears in the May 2003 issue of Entrepreneur. Subscribe »

We can speculate about why legal language is so opaque. But whether legalese is a conspiracy against the laity, the result of institutional inertia--or something else entirely--really doesn't matter. Most contracts are written in this bulky dialect and, like it or not, we all have to deal with it. Of course, for the well-financed deal-maker, legalese is nothing more than an annoyance--their attorneys take care of it. But if you're not budgeted for professional help, or if your deal is too small to justify legal fees, what should you do?

For one thing, don't despair. Read the paperwork anyway. At least you can double-check material terms: how much, what, where and so on. Even the best professional can miss something; another pair of eyes doesn't hurt. Then, do your best. When you must read agreements without the help of a lawyer, follow these rules:

1. Read slowly. Read every word. Reviewing contracts can be incredibly boring, so be prepared to spend some time.

2. Read literally. Contracts are scientific in their precision. Approach these documents concretely. A legal dictionary is also a good idea.

3. Go back and double-check all the cross-references. Again, read literally.

4. Watch out for defined terms. Insurance companies limit their exposure by the way they define "covered loss," "insurable event" and the like. In the music business, some record companies define "net sales" as 85 percent of actual sales. It may or may not be justified, but it does mean that every time you read the phrase "net sales," you're getting 15 percent less than you think.

5. If you don't know what it means, ask. Try to get an intelligent answer (in writing, if possible).

6. Watch out for legal mumbo-jumbo. Beware the following:

"Notwithstanding," "subject to," "provided that": These are elegant ways of saying "There's a catch."

"And" and "or": Misreading these can make a big difference.

"Or otherwise": This is one of the great catchalls.

"And/or": Does this mean "and" or "or" or both, and who decides this?

"Pursuant to," and "in accordance with": These are sneaky cross-references.

"Deemed": This is a second cousin to the defined term.

"Above," "aforementioned," "aforesaid," "following," "forthwith," "foregoing," "heretofore," "preceding," "hereinafter/above/before": These tend to be vague.

Any words in Latin.

Finally, never forget that the printed word is mightier than the spoken one. A loan officer at the bank may assure you that you've got four years to repay, but if you signed a promissory note payable "on demand," you could be in for a rude awakening.

A speaker and attorney in Los Angeles, Marc Diener is the author of Deal Power.

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