CANADIAN BUSINESS CONTRACTS HANDBOOK
Understand, Negotiate, and Create Your Own
Nishan Swais, Lawyer
Self-Counsel Press
(a division of)
International Self-Counsel Press Ltd.
USA Canada
Copyright © 2012
International Self-Counsel Press
All rights reserved.
Preface
Imagine being able to write your own business contracts with the skill and confidence of a trained commercial lawyer. This book is designed to help you do that. By guiding you through the principles and practices employed by lawyers whenever they put pen to paper, you will be able to fulfill many of your most important needs concerning the day-to-day operation of your business. What’s more, you will be able to —
• develop an appreciation for the thought processes employed by lawyers when writing business contracts,
• understand how the use of language — and its misuse — can affect the rights and obligations of your business, and
• discover how language works in a legal context to create certainty in your business affairs.
This book was written with you, a businessperson, in mind. No knowledge of the law or any legal training is required in order for you to obtain the full benefit of the pages to follow. We start with the basics — the things you need to know about contracts before you even pick up your pen — and then, in a practical, straightforward manner, lay out the principles and practices that go into writing contracts.
Our goal is a simple and useful one for anyone who owns, operates, or manages a business: Learn to write your own business contracts.
Introduction
Contracts are the backbone of every business relationship. If you own or operate a business, you know that contracts arise on a daily basis in any number of situations. Yet even the most confident and accomplished businesspersons will balk at the thought of actually writing a contract. Reading one can also be intimidating. As a result, the prevailing attitude among most businesspersons is simply to go without a written contract or just leave it for the lawyers.
However, it doesn’t have to be that way. This book was written to help remove the fear and mystery of writing business contracts by teaching you how to write your own.
1. Why Learn to Write Your Own Business Contracts?
Why is it important to you, as a businessperson, to learn how to write your own business contracts?
1.1 Running a business means working with contracts
Business people are required to work with contracts all the time. From issuing purchase orders to dealing with customer complaints; from filling out order forms to responding to landlord notices; from agreeing with suppliers to disagreeing with competitors; from hiring to firing; and from suing to settling; contracts pervade every aspect of what you, as a business owner, operator, or manager do. If you’re in business, you’re involved with contracts. It’s that simple.
It is important, therefore, that every businessperson know something about this element of business affairs. Learning to write your own business contracts is the best way to accomplish this. Even a basic understanding of the doctrine of contractual “privity” — the legal way of saying that only those persons that agree to a contract are bound by its terms (see Chapter 2: What Does a Contract Do?); the use and abuse of modifiers (see Chapter 13: Use (But Don’t Misuse) Modifiers; and, the benefit of writing in the active voice (see Chapter 14: Write with Authority), can go a long way toward helping you to better ensure the smooth and successful conduct of those affairs.
1.2 Controlling your business costs
Learning how to write your own business contracts can also help you to better control your business costs.
Consider you are someone who operates a residential roofing business. By writing your own contracts, you can take direct control over your business obligations to your customers. For instance, you could write a contract that says that the customer is responsible for the selection of the roofing tiles. That way, if the tiles are deficient, the customer will not be able to claim that you, the roofer, are at fault and seek a refund from you on that basis.
As well, because a roofing business provides essentially the same service to every customer, it may be possible for the owner to create a “standard form” contract that he can use for all of his customers. This can save both the time and expense of repeated visits to a lawyer, a tax advisor, or other professional.
If you are in a highly specialized industry, say auto parts manufacturing or herbal remedies supply, you will have no choice but to obtain the assistance of a lawyer to help you navigate the complex statutory and regulatory framework governing your industry. In the case of the auto parts manufacturer, this might relate to safety standards. In the case of herbal medicines, correct package labelling might be the issue.
Yet, as you know, lawyers can be expensive, especially for a small- or mid-sized business. However, if you can meet a lawyer halfway by doing the lion’s share of the contract writing — specifically, creating a first draft of a contract and focusing on what you can contribute to its contents — it will allow your lawyer (tax advisor, etc.) to focus on the specialized input he or she must provide, rather than also having him or her spend time on the more general matters you have already included. That can go a long way to further reducing your business costs.
1.3 Bringing the law “onside”
Much of how the law affects you and your business depends on what you say and, just as importantly, how you say it. The law expresses itself in language. More than that, language is the source of the law’s authority. After all, whether you’ve breached a contract, violated a bylaw, properly dismissed an employee, or committed a crime it all comes down to what you did (or plan to do) and what the law says you can do. Therefore, knowing what to say in a contract and how to say it is key to determining whether you will have the law on your side, and this will directly affect the success of your business.
1.4 Ensuring certainty in your business affairs
Perhaps the most important reason to learn how to write your own business contracts is to ensure certainty in managing your business affairs. By writing your own contracts, you control the language that sets the terms according to which others will be legally obligated to deal with you and your business. In turn, this will enhance the success of your business by helping you to avoid disputes and ensure your business needs — as you have defined them in the contract — are met.
Consider the following example. Suppose you are a caterer and you are expecting delivery of a cake from a baker. The cake is for a wedding you are catering. The wedding date arrives but you have not received the cake. The bride is beginning to get nervous. You check your contract with the baker. There it is in black and white:
a) Cake to be delivered on June 11, 2012.
You decide that the situation merits a call to the baker: “Where is the cake you were supposed to deliver to me today?” Surprised, the baker