The law, like most disciplines, has very few absolute truths. However, it is my firm opinion that a good business transaction is always better than a lawsuit. Therefore, it’s critical that business transactions and the underlying contracts be structured to maximize value, reduce risk and avoid uncertainty. After all, risk and uncertainty often lead to disagreement and sometimes litigation. Therefore, I recommend that parties approach business transactions and contracts with the mindset (but not necessarily the goals) of a litigator – and then use that mindset to avoid litigation.
I do not mean that parties should be argumentative or take one-sided positions. Rather, what I mean is the deals should be structured and contracts should be drafted as simply, clearly, consistently and comprehensively as possible. And once you’ve done that, they should be re-examined, and the following question should be asked:
• Is this the right deal, at the right time, with the right party?
• Is the deal structured as simply as possible?
• Is the contract drafted as clearly and simply as possible? Is it consistent?
• Which provisions invite differing interpretations?
• Have you covered as many variables/contingencies as possible (you generally can’t cover them all)?
• Have you allocated between the parties as many of the risks/responsibilities as possible (again, you may not be able to cover them all)?
• Have you included appropriate insurance, indemnity and escrow provisions?
• Have you allowed for termination or some other type of walk-away if the deal doesn’t work out? If so, have you anticipated the likely issues, disagreements and entanglements that can arise at this stage (they can be much different than those at the outset)?
• Have you considered how disputes will be resolved? Mediation? Arbitration? Litigation? Appraisal? By whom? Where? Who pays? What law/rules govern? Etc.
• In light of all of these questions, and even assuming you’re comfortable with all of the answers, is this a deal that should be done?
Thinking like a litigator may be the best way to avoid litigation over your business deals.