Blog No 136

December 10, 2021

READING TIME: 10 Minutes

By Mack W. Borgen

Author, The Writings of a Lifetime (2021); Dead Serious and Lighthearted – The Memorable Words of Modern America (Three Volumes) (2018-2019); and The Relevance of Reason – The Hard Facts and Real Data about the State of Current America (2 Volumes) (2013). As Advertised in The New York Review of Books and Recipient of Eight National Book Awards

For a “cleaner,” non-email presentation of this and my other blogs, go to  https://www.mackwborgen.com/  and click the “Blogs” tab.

A GREAT AND HAPPY HOLIDAYS TO YOU 

 

QUICK FACTS FOR THE DAY

Just a Strange Fact

At this time, a majority of the current nine U.S. Supreme Court justices, who are appointed for life and whose average age is now a mere 53 years old,

were put there by U.S. Presidents who lost the popular vote.

And An Admittedly Personal Bias

The United States military budget of $780BB is larger than the aggregate military budgets of the next twelve nations combined. But still, America remains the only Western industrialized nation which somehow cannot “afford” to provide paid leave for families. My humble suggestion – possibly we, quietly as a nation, should reconsider this.

—

The (Mis)Use of Litigation,

The Heightened Importance of Contract Precision,

and

The Need for the Close Review of “Boilerplate Terms”

Over especially the last several decades, the volume and regularity of use of business litigation has risen. Each year in California alone, there are more than 210,000 civil lawsuits filed. Over a five-year period that is about one for every 37 people in the state — and this number does not include the millions of criminal proceedings, family and juvenile matters, and probate appeals etc. (Court Statistics Report published annually by the Judicial Council of California).

This is regrettable. This is costly both to individuals and to businesses. To a certain degree, it is merely another dimension of our country’s increasingly hostile, caveat emptor (“buyer beware”) world. Litigation is now oftentimes seen merely as another cost of doing business; another line item for which to budget. However, the fact that this is regrettable and costly does not diminish it as our current reality for which we must prepare.

Certainly, litigation is necessary at times. Honest, legitimate business disputes arise. They do need independent, third-party, judicial resolution. However, some individuals now view the threat or use of litigation (collectively referred to herein as “litigation”) as a routine method of negotiation; a manner of flexing and intimidation, and a de facto tool of coercion. It is beyond the scope of this article, but this misuse of litigation is parallels the manner in which some individuals now pathetically view bankruptcy merely as a “business tool” as opposed to a matter of last resort; a matter of disappointment and sometimes even shame.

I have written on various aspects of this subject before such as in my article “Dangerous Neglect” which was published in The San Francisco Daily Journal and The Los Angeles Daily Journal a number of years ago. However, because this trend – this too common misuse of litigation – has continued, I suggest again that contracts must be drafted even tighter than ever.

There are many, varied dimensions to this problem. For example, large corporations carefully select their jurisdictions – Delaware for a variety of reasons such as its firm protections of corporate officers and directors and, more recently, Virginia because of its prohibition of class actions. Also, there is the ever-thickening terms and provisions used in our “Click/I Agree” society. One good example, if not, confirmation of the heightened lawyering of large American businesses was noted over a decade ago in an article which noted that in 1980, the typical credit card contract was about 400 words long. Today, many are 20,000 words.” (Siegel, A., Etzkorn, I., “When Simplicity Is the Solution,” The Wall Street Journal, March 30-31, 2013).

For smaller and mid-sized businesses, sometimes one of their best defenses is the careful, consistent inclusion of what are dismissively referred to as “boilerplate terms.” These terms are normally at the end of any thoughtful contract or are attached as an Exhibit thereto. Too often, they are not read until litigation is threatened, but they can be critically important. In certain circumstances and if well-drafted, they can shut down the misuse of litigation by a customer or other contracting party.

For numerous reasons — including the ever-changing dimensions of our electronic tools of drafting, communication and contracting, close and even periodic review of standardized contracts and their boilerplate provisions should be conducted by all businesses — even experienced businesspersons using such “standardized” contracts.

Some of such “boilerplate” terms which would normally be included address such (temptingly boring) matters as the following:

1. Power and Authority
2. Entire Agreement; Amendments
3. Attorneys’ Fees
4. Notices
5. Governing Law and Venue
6. Binding Nature
7. Survivability; Partial Invalidity
8. Construction; Counterparts
9. Arbitration (Sometimes Included)
10. Cooperation and Further Documents
11. Right and Exercise of Independent Reviews.

Allow me to underscore the importance of these types of provisions by the following two examples:

                                             Entire Agreement; Amendments. Because in our new business world emails are quickly written and casually sent, it is critical to expressly define what must be done to actually “amend” an agreement. Otherwise, parties may claim via concepts of email “amendments” or claims of detrimental reliance that the terms were changed and that an agreement was “amended” via an email or other casual communication.

                                             Attorneys’ Fees. Litigation of any form is an exhaustive and inherently expensive process. In many instances in California and other jurisdictions, unless there is an express, written provision that the “prevailing party” is entitled to attorneys’ fees, then each party – regardless of the outline – will be responsible for its own attorneys’ fees. Because of this and unless there is a  attorneys’ fees clause, then either party can threaten the other party with having to incur burdensome attorneys’ fees costs regardless of even the obvious correctness of the “innocent” parties’ position.

CLOSING

                Even in the context of contracts, there is a bottom line. In our sadly increasingly hostile business environment, to avoid disagreement amongst the parties, and to minimize the risks of costly litigation, written contractual language is more important than ever. Even the previously boring “boilerplate provisions” must be carefully drafted.

 Get Copies of My Books

Recipient of Eight National Book Awards

Best Nonfiction Book of the Year in Three Separate Categories!

— U.S. History, Current Events, and Reference — 

Best prices. Fast shipping. Just go to http://mackwborgen.com/shop/ (Just Click “Book Ordering” tab). All books will be signed by the author and shipped within five business days. Also available on Amazon.

All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical without the prior permission of the author.