Monday, November 24, 2008

Contracts: Leases: Post now, edit later.

When do we need contracts? When you do anything that requires some performance by another it’s a good time to have a contract in writing. Situations where I see the most problems are contracts for selling a horse on consignment, any kind of lease arrangement, boarding contracts and partnerships, joint ventures or business arrangements. Some of these contracts can be done fairly well yourself if you do the right research, others should never be attempted without qualified legal help.

I make my living as a lawyer. I do not make my living giving out free advice, but times are changing and researching the law is not as hard as it used to be. I do not recommend just using someone else’s form contract or contract drawn up for them by their lawyer, but if you are willing to really put some time into the project you can draw up a fairly good contract yourself for some of the everyday things the average animal owner might need. They key is “willing to put in the time to research.” That might take several days or even a week, but it could save you a few hundred to even a few thousand dollars in legal fees.

Contracts from friends or posted on the internet can be a good place to start when drafting your own contract. They are not a good place to end, but the hardest part is knowing where to start. Having a good start right in front of you ready to be personalized and edited will make all the rest easier. Here are some of my helpful hints to DIY contracts.

Leases: If you are going to draw up a lease contact then do the research to understand what every term in that lease means. We are not talking about an entire legal education here, but look up each term on-line until you understand it and can clearly understand how it will affect your set of facts. You will not need to do this over and over again, you will just have to learn it really well once and then keep looking for new laws as you sign new leases. You should not sign anything you do not understand yourself.

Lease contracts are fairly standard in some ways and completely individual in others. After you have researched all the legal terms and their meanings that some person on a BB gave you, then do the extra research to see what kinds of problems people with leases have already experienced. That means searching for “lease gone wrong” threads instead of sample lease contracts threads. All contracts are good until something goes wrong. Learn what others wish they had put in their contracts as well as what others did put in there. In fact, spend more time learning how to avoid common mistakes or uncommon unforeseen occurrences.

Put everything in there you can think of that might possibly go wrong. You don’t have to go into great detail. You don’t have to cover yourself in the event a satellite breaks up in space and lands on your leased horse, but you should put something in there that covers all unplanned events whether its space debris or the death of the lessor. Or your death. Or the horse going lame halfway through the lease or the barn going under while you are contractually obligated to board there.

Who can ride the horse, who pays what bills under all circumstances, who makes major medical decisions, who pays what when and how much and how is the lease continued or ended should be in there. How the horse shall be used and what happens if its comes back in worse shape then when it left should be in there. Clearly stating who the legal owner is should be in there, but for some reason this gets left out so when leases end horses do not come back without a fight. Some leases might be even more specific like no 6 inch chain shanked bits or no sweet feed or barefoot trimmers or shoes on a barefoot trimmed horses. If it matters to you then put it in there.

In most cases, as I said before, a judge will assume if you took the time to write up a lease you put all the agreement in there. If you write up a lease and then run down the driveway shouting out additional instructions to the lessee, none of that will count as part of the lease. Nor will e-mails or statements in front of witnesses or a signed affidavit from the chief justice if the supreme court. Unless a lease term is so ambiguous as to be incomprehensible to a judge, no other evidence is allowed.

So now you have a lease agreement that 5 pages long! Yeah, so what? Shouldn’t a lease agreement for a horse be as long as agreement for an apartment or a car? Many leased horses are worth more then a leased car and board is more expensive then rent. If something goes horribly wrong with a car lease it does not haunt you for years that your car died or was ruined. It is your horse—its more then just a financial investment. Your lease may end up filling several pages, but its not like you can order new parts for a horse that comes back with a bad leg. You have to protect your investment and your horse. If he comes back broken you still have to pay board for the next 10 years. You should not feel guilty for making someone read and sign 3 pages of terms. Put it in there and if the person wont sign then they wont sign. Move on to someone who takes the lease as seriously as they do the terms and conditions of any other legal contact they enter into.

You should expect that the other party may want to negotiate their own terms too. Maybe they do not want to pay for mortality insurance and you both agree to change that term. Thats OK. Its Ok to have a two way conversation about your contracts. Its not OK to leave out terms because someone is too lazy to read 3 pages or every other contract you have seen for horses was shorter. The terms and conditions for me to use google blog are longer then any lease contract I have ever drafted. I did not hesitate the click “OK. I accept” because it was long. I just knew I had no choice and agreed. You and your other party do have choices in what your final agreement is, but the talking it out makes sure both sides have thought long and hard about signing a contract that may cost tens of thousands of dollars to fight out in court otherwise.

Here is a good test to know if you are willing to do the work to draft a good DIY lease. If you have not made it this far in the blog you are not a good candidate for taking the time and effort to make you lease worthwhile. And you quit so soon you do not even know it.

If you are still reading, and it takes me longer to write this stuff then for you to read it, the final thing you should do before using a pre-made lease that you have now fit to your facts is to look up a few examples of court cases in your state where a lease for a horse went bad. That will tell you where the law in your state varies from the law in the state you chain letter lease originated in. Case law is free and is found by googling or checking your state’s court websites. You look for the most recent case and see how a judge looked at similar facts. You do not have to be a lawyer to see how things played out and just what I have posted about contracts should get you enough basic understanding to figure out who won and who lost and why. The lawyers must know enough to come up with those legal arguments, you just need to read enough to understand if your state has any strange rules that were inconceivable to whomever wrote that original contract. If you can't find a case with a horse read one about any other non-real estate lease.

So, the 4 point plan is :
1) Get something to start with and know what you want.
2) Read it and research until you actually understand all the legal terms
3) Make it reflect the bargain you want in your lease
4) Check your states laws and cases to make sure the contract is valid in your state

I know it sounds like a lot of work. It is, but you wont have to redo it over and over again. You will change the terms for new leases or might add or subtract from past learning experiences, but its something you can build on and use over and over again for the one time effort of making it right. If its worth your money hire a lawyer, but this is one of those situations where the lawyer must understand about horses because cars do not learn bad habits on their own and apartments do not tend to disappear into the night only to reappear under a different name 4 years later.

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