Speaker 1: I'm Christian Molessi, Executive Officer of the HBA of Berks County, Pennsylvania, and I'm not an attorney. I am an MBA. We're going to translate the lofty ivory tower language of the attorney into thingamajig, how you doing, and whatchamacallit, so that the average Joe and Jane contractor can apply it to their business today. Although this is based on Pennsylvania law, it will apply in most other states as well. Okay, let's wrap up with some common contract clauses. You have a list of them here. These are common pretty much throughout the United States. They're common pretty much no matter what contract you're signing. So if you go pull out, if you're one of these people that has file cabinets full of documents either at your business or at home or both, like me, you can pull out the house that you bought or the contract with the HVAC guy or the contract for dog grooming or the contract for cleaning your carpets or mowing your grass. And if it's a reputable, decent contract, especially the bigger, longer ones done by lawyers, it's going to have a lot of these same clauses. So why are there standard clauses? We've talked about this before. There are standard clauses because some lawyers somewhere sued and they won. They came up with a wrinkle, a niche, a gizmo, a way to win the case, a trick, whatever you may want to think of it as. And so some other lawyer then said, well, I need to be able to protect my client so that that doesn't happen to me again. You see, law is based on precedent. So we don't necessarily go back to the law on the books. We go back to what precedent has been established by other judges. So we're a precedent-based legal system in America. So it doesn't matter what the actual paperwork says. It matters also what precedent has been set. Such and such A versus B is the way the case is always stated. And so we've come up with these, the lawyers have come up with these standard clauses. When do they apply? The ones we're going to go over here probably apply on every contract. So when you hear the list and you go, oh, now I understand why I was saying at the beginning of this, why my contract should be eight or nine pages long. I'm not even going to talk about your scope of work. I'm not even going to talk about your terms, how much you're getting paid, when you're getting paid, your progress payments. I'm going to talk about standard contracts language that should be when you're hiring a model or getting a dog cleaner, leasing an apartment, leasing commercial space, these could all be in all of them. Now I like to think of it as from the bottom up. I know that's kind of weird, but to me it seems like the easiest to understand clauses are right near the signature and they get harder as you get kind of into the middle of the document. So I'm actually going to talk about the contract from the back, from the signature page to the front. So we have the signature block, that's signatures, dates, printed names, titles, and companies. We certainly want to have that and that should be of the parties involved. So it may be again a husband and wife or two partners or it's certainly going to be party A and party B. Now these aren't necessarily have to be in the order that they're here, but it's roughly about right. So right above the signature block is usually going to be something called the complete agreement. Sometimes you'll see it called the entire agreement. This is kind of a silly title. It basically says this is the complete agreement. Anything that we talked about before, any discussions that we have doesn't apply. Everything we've narrowed down and we've put it in writing and if it's not in writing in this document, it doesn't count. So it's basically protecting both parties to say all the things we discussed. So if they come back and say, you know, during the discussion you said you were going to put the green in for free. Yeah, but remember you said you wanted this over here instead? That covers you from that. So that's what complete agreement does. Notices. Another really easy one. This is the notices clause. This basically says if during the course of this contract or at any time thereafter, if we need to send information to each other, this is the way we're going to send it and this is where we're going to send it to. So there's going to be a paragraph that says we're going to send it only by United States Postal Service certified mail return receipt requested. Or it may say we're going to send it only by Common Carrier or it may say we're going to send it only by FedEx or it may have a list. It might say you have to send it by courier in a clown suit. If that's what you both agree to, that's enforceable and legal. So whatever it says and you're going to send it to me at this address, 123 Main Street and I'm going to send it to you at this address, 456 Oak Street and obviously the full address. Pretty simple stuff. Amendments, additions and changes or in our parlance we may call this change orders. So here's our contract. This is the document that we have as a contract. How do we amend this at a later date? That's what it's going to say. And it's usually going to say something like changes, additions and amendments can only be done in writing. All change orders must be signed by both parties before they're enacted. It's going to have language like that. So it's going to say it can only be done in writing and that's what it's all about. Dispute resolution. How do we go about if we disagree? Do we litigate? We go to the judge. Do we arbitrate? Do we mediate? There's all of these different ways that we can handle it. Do we negotiate? Do we bring in a third party? Who is our negotiator? Do we use the American Arbitration Society or whatever they're called? Do we get Bob down the street who we both respect? And he's going to be an unofficial because he's not recognized by the court, but he's going to sit down with us and say, hey, come on you guys, work this out. And he'll help you talk through it. How are you going to do this? That's our procedure for when we disagree. Time is of the essence. Another pretty silly clause, but it's a standard lawyer clause. Time is of the essence are magical words. In that order, time is of the essence. To the lawyer types, those are magical words. It's kind of like abracadabra. Time is of the essence means, I really mean it, hurry up, don't let this sit up. That's what it means. I mean, it's just to say, hey, this is important to me. ASAP is what we might say. That's the time is of the essence clause. Time is of the essence. We all care about this getting done in a timely manner. In legal terms, that's what that clause is going to say. Indemnify. This is the word we hear and nobody ever really knows what it means. It just means hold harmless, big fancy lawyer word, hold harmless, which basically means if I indemnify you, I'm saying you're not responsible, which guess who is then? If I indemnify you, then that means I'm saying it's not your fault. That must be my fault. Or maybe we can blame that guy over there or that gal down there. But if I indemnify you, I'm saying that you're not responsible for this stuff. Now you can have partial indemnification, you're indemnified for this, this, and this, but you're responsible for this, this, and this. That's what that clause means. The lawyers help you write this stuff up. You can find basic stuff on the internet to get you started, but the lawyers help you write this stuff up. Legally binding. Another really silly clause that's in most better contracts. It just says, we agree that this should be what we agreed upon. We agree that this is all legal stuff. Why is that? Because somewhere along the line, people signed a contract and went, well, I didn't know that you meant that it applied in a court of law. You mean lawyers and stuff believe it? Yeah, it's legally binding. So some lawyers said, let's write a clause. We both agree that this is legal. I mean, it's a silly clause. Do you need it in your contract? Absolutely. You need it in every one of these, in every one of your contracts. And I know they get to very long. They get to very tedious and they're a pain in the butt, but this is what you need to protect your company. That's why we're here. Counterparts. Counterparts means that what we do a lot of times, especially in the contractual world, is we will have two copies of the same contract, exactly the same. And there'll be two originals because you don't want a copy and I don't want a copy. We both want originals. And so we'll have two originals. That's what counterparts mean. A short little sentence that basically says that this contract and anyone that are similar to it, even if they might've been signed separately and not copied, they're also, it's the same thing. They're all the same part of the same agreement. That's what counterparts mean. Severability. That's actually pretty simple as well. Sever. We can sever the contract. So it's saying if we go to a judge or an arbitrator or someone like that, that says that clause 15 doesn't apply. The law changed. The terms weren't clear. I wrote it and it came in favor of you because it was ambiguous. Just because that clause might be thrown out or that clause is specifically determined this way or that way, doesn't affect the rest of the agreement. That's a key clause. I mean, all these are key. But if you think about it, you can imagine the situation where someone would try to fight you on clause number 14. And if they win, they can throw the whole agreement out and don't owe you any money. No, no, no, no. You went on clause number 14. If I don't wipe my feet, I owe you a hundred bucks or whatever silly clause you might agree on. Well, just because you went on that, I owe you a hundred bucks. You still owe me the 70,000 or whatever the case may be. Governing law, jurisdiction, venue. Sometimes you'll see it as all three. Sometimes you'll see it as just one of them or two of them. That says if we do have a legal dispute, where are we going to go? What law is going to apply? Now, most of the time, this doesn't matter. But some of you work across county line. Some of you work across state line. Some of you hire people or buy from across county, state, or federal lines, meaning from a different country. If we have a legal dispute, where do you want the case to be heard? You probably want it heard in Berks County. You would say in the Berks County Court of Common Pleas. Maybe you have a satellite office here and your headquarters is in Dauphin or you're closer to Cumberland County or you're near Bucks or Perry or whatever the case may be, Lancaster, Lebanon. Well, then maybe you want to say any disputes would be heard. The venue will be in Lebanon County. That allows it to be closer to your home. You use your lawyer and he's not charging you his 250 bucks to travel an hour or two counties over every time he needs to go to court and then an hour back before he even did anything, car time. Title and headings. Here's another silly one. So I'm giving you title and headings. That's what I'm giving you. So title and headings says, title and headings are just for the purpose of identification only and the language of the clauses should be what's really considered and not the name of the title or the heading. Some lawyer along the line somewhere said, well, severability. My client's disabled. And when he thinks of severability, he thinks of severing his artificial limb and setting it on the side. So he didn't realize that that's what severability meant. So we have a title and headings clause. I mean, it's silly stuff, but this is what lawyers have done. And finally, event of default, or maybe not finally, but this is the last of the end. Event of default. What do we do? What happens if one party defaults? If you don't do what you said or they don't do what they said, what's the event of default? Now on the paper, I put a couple of lines that just have dashes. That's the part that maybe before you attended the seminar that you thought of was your contract. That goes there. So that's your scope of work. So that's the part that maybe before you attended the seminar, you thought, this is my contract. We'll put that there and then put all these clauses after. So we're getting kind of from, again, going from the back of the front. Our terms, we're going to do this by such and such a day, we're going to pay this amount of money. This is our scope of work. Background, the background is going to be, Joe has an address of such and such a place and he is an individual resident residing in the state of Pennsylvania. And ABC Corporation is a corporation incorporated in the state of Pennsylvania. We have agreed on June 27th, 2012 to the following terms. That's background. And there may be additional background and that may be part of the opening as well. So we kind of brought it from the back to the front, but that's a contract. Now again, we could spend hours talking about this. I guess the last thought I would leave with you is, we all look at this and we say, I'm not the legal beagle. I'm going to go hire the lawyer to draw this up and how much is this going to cost? What I would recommend is get the person that's closest to a legal beagle in your company and that might be you because there's only one or two of you. And you go scour the internet, you go ask some of your fellow committee or board members if you could have their version of the contract electronically. You ask the HBA or the Kitchen and Bath Association or the Landscape Association or whatever you're part of if there's a standard contract electronically. And then all of these are standard clauses. So you draw up the contract and all you're doing is cutting and pasting. And you might read it because in some places it says wherefore art thou and other places it says therefore art thou. So you're changing it to make it consistent. In some places it says contractor and other places it says owner and other places it says subcontractor. So you're changing it to make it consistent. And then you get this whole kind of assembled mass together and then you give that to the attorney and you say, can you review this please? Feel free to hack it and slash it. I'm not an attorney but I've been working on this for quite some time. And that way you're going to save yourself a whole lot of money.