Sometimes All You Have To Do Is Ask

As a matter of policy, I do not give any legal advice in response to questions posted as comments or otherwise in this blog.  However, the following question piqued my interest and provides a platform for discussing the sort of everyday problem an average person might encounter.  The question was:

I have a fear of dentists and have neglected my teeth for years. The pain is so great in a few teeth that I finally broke down and went to a sedation dentist. They examined me and came up with a proposal to fix my entire mouth for the sum of 13,000.00, and finance it. The financing would result in the final total being 18,546.00 from GE Money Bank. Never heard of them. After having a day to crunch the numbers, the 309.00 payment over 5 years was going to be difficult. My girlfriend is willing to pay the dentist the 13,000.00 in cash, but I’ve signed a contract stating that I agreed to the 309.00 payment for 5 years. The contract was signed Friday afternoon, the first session is scheduled for Monday (08/02/10). Can I rescind the contract and simply give the dentist cash, rather than incur all that interest? What are my choices? No work has been done on my mouth as yet. My dentist would be happy to get paid the cash, but the contract that was signed would probably have to still be honored. How could I cancel this contract?

Am I stuck with the ridiculous interest payments and the grand total of 18,546.00? 

First, congratulations to the reader for realizing that he has a signed contract that may be valid.  You would be surprised how often clients come into the office having  just signed a contract for the purchase of real estate for many hundreds of thousands of dollars and say:  “I just signed this contract.  Can you look it over and tell me if it is okay?”  It is too late to have your lawyer look over a contract after it is signed.  At that point, if you have all the requisites for a valid contract, the damage is done.  So that is lesson number one — have your lawyer look over contracts before you sign them and not after.

Second, the contract is between GE Money Bank and the reader.  It is not between the reader and the dentist.  Nevertheless, the dentist is still the key to backing out of the contract at this time.  By the way, the GE in GE Money Bank stands for General Electric and it is a major consumer finance company.

Finally, I think the key to the reader’s problem is simple — just ask.  On Monday, he should walk into the dentist’s office a little early and offer to pay up-front if the dentist will tear up the contract.  I bet that the dentist will be happy to tear up the financing contract and take the money.  This is especially true if he just signed the contract on Friday.  Most likely it has not been submitted to GE Money Bank yet and no monies have been advanced to the dentist.

All is not lost if the dentist will not tear up the contract and take the money.  If that is the case, the next step is to read the contract.  Interest is charged for use of money over time.  The $5,546.00 interest charge is based on the use of the $13,000.00 for three years.  If there is no pre-payment penalty in the finance contract, then the $13,000.00 can be paid at any time and the interest due after the date of payment avoided.  Even if there is a pre-payment penalty, it is likely to be much less than $5,546.00.

I am often surprised by how often someone will come to me for a “legal” way out of a situation when they have not even tried to talk to the other party.  Sometimes the solution is as simple as asking.  I will bet that is the case here.  But, if not, the next step is to read the contract and see if anything in it can be used to your advantage or keeps you from doing what you want to do.  In this case, as with most finance contracts, it probably can be prepaid and some money may be saved.

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Hiring A Lawyer Is Not As Expensive As You Think

Here are six good reasons for why hiring a business lawyer is money well spent:  6 Reasons Why Hiring A Business Lawyer Is Not That Expensive. As someone who litigates disputes, I can say that litigation is much more expensive than doing it right in the first place.

How Not To Structure A Deal: The CrunchPad Blow Up

TechCrunch founder Michael Arrington recently announced that the CrunchPad project blew up on the eve of the CrunchPad’s launch.  (See, The End of the CrunchPad) I’m not that interested in the tech or the details of the dispute between TechCrunch and Fusion Garage.  No, what I think is worth writing about are the lessons that the average businessperson can learn from this.  There are several lessons here.

Lesson 1: Don’t Do Business With Anyone You Wouldn’t Do Business With On A Handshake

In this post, Arrington mentions the “unsavory investors, borderline loansharks” that Fusion Garage raised money from.  He also alleges that Fusion Garage is a financial mess.  That sounds like a recipe for disaster.  When you’re doing business with a company, you’re indirectly doing business with their investors, shareholders, and associates too.  That is especially true if, as seems to be the case with the CrunchPad, the relationship is essentially a partnership.  Arrington makes Fusion Garage sound desperate.  The desperate turn into the greedy and the greedy will screw you.

Lesson 2: Get The Deal In Writing!

You want to do business with someone who you’d do business with on a handshake, because written contracts can be broken.  In fact, you have the right to break a contract but you must be prepared to pay the damages caused to the other party. Therefore, the other person’s integrity matters even with a written contract.  As the saying goes — trust but verify.

The CrunchPad project appears to be riddled with uncertainty as to the precise role of each party, and who owns what.  The contract should clearly state who pays what expenses and when, how the parties are reimbursed from income, and the profit split.  It is noteworthy that TechCrunch and Fusion Garage apparently had no written contract.  This is surprising because Arrington is a lawyer.  The lack of a written contract is likely to make for prolonged and extremely expensive litigation.  (One-hundred and six paragraph twenty page complaints don’t come cheap and that is only the beginning.) Without a written contract, the details of the deal must be teased out from dozens or hundreds or even thousands of conversations, telephone calls, letters, and emails.  That takes time and money — lots of both.  All of that information (much of it transmitted without consideration as a contract term or for future litigation) will provide fodder for both sides to argue over.

Lesson 3: Know Who You’re Dealing With And Act Accordingly

See, Lesson 1 above.  TechCrunch alleges that Fusion Garage and its founder “have shown a long-term pattern of deceit in their business dealings.”  Just a few days earlier he was saying how much he admired the founder and what good friends they were.  Perhaps TechCrunch is excused because Fusion Garage and its founder are in Singapore.  They claim that Singapore government control of embarrassing news made it difficult to find out about the founder’s past. Certainly, a company with TechCrunch’s reach in the tech world had other contacts in the Singapore business community. Moreover, TechCrunch now says it discovered the unsavory nature of the Fusion Garage founder last summer.  That would have been the time to quickly shorten the leash and to attempt to reduce the deal to writing. Frankly, the deal should already have been written, but this should have been a red flag to make an effort to clearly express the deal in writing.

I added the “and act accordingly” because I’ve had clients who actually did know negative information about business partners and investors and dealt with them anyway.  They almost always rue the day they did so.  When things blow up just like they should have known they would, they always say, “I knew better.”   It is amazing what you can discover on Google these days, especially in the U.S.

Lesson 4: The Best Time To Get The Deal In Writing Is When You’ve Got Leverage

Early on TechCrunch had all the power and leverage and Fusion Garage had none.  Fusion Garage probably still lacks leverage, but it doesn’t matter.  Fusion Garage has made its desperate move to grab the prize for itself at the last-minute.  Early on TechCrunch could have secured a written contract on favorable terms because Fusion Garage needed it more than it needed Fusion Garage.  Now that TechCrunch has paid expenses, widely publicized the CrunchPad, used its connections, and otherwise moved the project along, Fusion Garage no longer feels a need to share the project with TechCrunch and can make its move.  Often the greatest power a party has is the ability to walk away if the deal doesn’t suit them.  If the other party needs you, but you don’t need them that is when you have the greatest leverage.  Once the project is underway, you’ve already got a deal of some sort and its terms are inherently unclear.

Lesson 5: You May Have A Partnership Whether You Intend One Or Not

A partnership is one business relationship that requires no intent or effort to create.  When two or more persons or companies enter into a joint venture together, they have a partnership relation whether they intend one or not.  That means that without a written contract to define the relationship, rights, responsibilities, and obligations of the parties, the body of law concerning partnerships will apply.  That can be messy.

Lesson 6: Be Very Careful About Trying Your Case On The Internet Or Any Public Forum

Already Arrington is locking himself into positions and making contradictory statements by trying his case on TechCrunch.  Obviously, I’m not privy to all the emails and other information and I’m not interested in reviewing them all.  However, I know from experience that with every additional word he posts that Arrington is getting locked in to positions, probably without the benefit of a careful review of what has been said before.  Even a cursory review from one post to the next shows contradictory statements.  On the one hand, the Fusion Garage founder “was the kind of young, determined entrepreneur that I admire. I thought we’d be friends for the rest of our lives.” On the other hand, Arrington says in the next post that he’d learned last summer that the founder is “not a good guy” and deceitful.  Huh? If  Arrington learned last summer that the Fusion Garage founder  wasn’t a good guy and had previous bad business dealings, then how could he have just written what an admirable guy and friend for life he was?  A skillful lawyer can do some damage with such contradictions.


O’ the Shame of Legalese!

   I try to write as much as I can in plain English.   As a lawyer, that isn’t always easy.  Lawyers use five words with five syllables where a single two syllable word would do for many reasons — They don’t know any better; i.e., that’s the way it has always been done. They’re afraid they’ll miss some nuance or meaning.  They’re lazy or their client won’t pay for better; i.e.,  the form they used as a template was written that way or the client won’t pay for a decent revision. (I want a lease tomorrow and I want it cheap.) They think it makes them sound like a “real lawyer.”  Other lawyers will criticize them and accuse them of being a poor lawyer if their writing isn’t impenetrable.  Sometimes it is an artifact of the negotiation process with each side adding words to “spell it out a little better” or to “clarify a point.”  The end result is a morass that is neither spelled out nor clear the day a dispute arises.  Here are some particularly egregious examples from The Legalese Hall of Shame.  I’m really terrified by the thought of a four page 1,000 word sentence.  Is such a thing even possible?

I believe that impenetrable legalese creates more problems than it solves.  It can actually breed litigation when documents are so lengthy and ambiguous that they can be read a dozen different ways.  It may take a third party in the form of a judge or jury to decide what it means, and they may not agree with the litigants.  More on this tomorrow.

Are You Really In Good Hands If Your House Is Flooded?


Tropical Storm Fay has brought a deluge to Lake County.  The local Books-A-Million is sold out of “Ark Building for Dummies.”  Unfortunately, this is no laughing matter for the many Floridians whose homes are flooded by rising waters.  Most homeowner’s insurance policies do not cover flooding caused by rising water.  They only cover wind driven water damage.  You need “flood insurance” from the National Flood Insurance Program to cover damage caused by rising waters.  Some private insurers offer flood coverage for an additional premium, but most don’t. The good news is that higher hurricane deductibles won’t apply because Fay never became a hurricane.  For more details, I suggest that you read this very well done article from the “Orlando Sentintel”.

The question of wind driven water versus rising waters can be fertile ground for litigation.  Although with Fay, it may be very clear that most of the flooding is from rising water.  If you think your claim has been unfairly denied, you may wish to consult one of the many lawyers who handle insurance claims and have experience in this area.  Be forewarned though, courts will enforce insurance policies as written, as many Florida and New Orleans homeowners have learned.

I Vant That In Blood But Vith A Peppercorn!

Here’s an interesting article about a promise written in blood and Korean.  The dramatic touch of writing the promise in blood did nothing to enhance the enforceability of the promise.  The trial court ruled that there was no consideration for the promise to reimburse the other party’s investment losses.  Consideration is required for a validly enforceable contract. That is, each side must exchange something of value in exchange for the promises of the other.  However, the legal maxim is that a peppercorn can be adequate consideration, which is a colorful way of saying that very little consideration is required.  The case is now on appeal.

The Law Religion Culture Review blog has posted the entire verbatim contents of the appellate brief online.  The gist of the argument is that the consideration from the party who lost money was the “forbearance of suit.” That is, he could have filed suit immediately but agreed not to due to the promise of repayment.  Forbearance of suit is also recognized as adequate consideration for a contract in Florida.

The lesson here is to skip the dramatics and write your agreements in ink not blood.  Whether your agreement is enforceable will ultimately depend on whether you remembered the peppercorn and not whether you gave an ounce of blood in the drafting.

Judges Aren’t the Lone Ranger

Some clients naively assume that judges are appointed to protect them and have broad powers to do whatever they feel is “fair” and “just.”  Of course, what is “fair” and “just” in the eyes of the client is whatever relief they feel they need.  However, it is not the role of the judge to dispense some sort of rough justice according to what they deem is fair.  They are as constrained by the law as anyone else. This is where we get the saying, “We are a nation of laws and not of men.”

It is not unusual for a judge to feel badly as she executes her duties, but a good judge does her duty as she believes the law requires.  The judge is concerned with the law and not necessarily with the negative consequences of the application of the law to a particular individual. A judge cannot save you from a bad bargain and is expressly prohibited from rewriting a contract for the parties even if it unfair to one of them.  The judge can only grant those remedies that are allowed by law in a particular case. There are usually other judges above them in the hierarchy who will reverse their decisions if they believe they overstepped their bounds or misapplied the law.  Judges hate to be reversed.

I thought about this today because a client expressed the vain hope that the judge would rewrite his agreement to grant more favorable terms to him.  The judge could not possibly do this.  I also came across a sad case involving a Milwaukee man who was losing his $240,000.00 home due to a $2,600.00 zoning code violation.  He had illegally parked a vehicle with expired tags in the driveway of the home.  Unfortunately, the gentleman had numerous personal and mental issues and the situation just snowballed.  I got the feeling the judge felt bad about it when he found out, but as he said,

The city was entitled to a judgment,” [Judge Richard] Sankovitz told Public Investigator on Thursday. “There hadn’t been an answer to the complaint.

The moral of this story?  You’ve got to look out for yourself first.  Don’t count on a judge to save you later.  He may not be able to do so.  Judges aren’t the Lone Ranger riding the prairie in search of wrongs to right.  They’re people constrained by the law just like everyone else.