Du Malone writes: This is the fifth of a series of posts on the theme of contracts, negotiation, and agents on FM.

This post presents a lesson that I learned in my professional life.

I’m not 100% certain, but I’m pretty sure that I learned it from a book by a literary agent — Carole Blake’s From pitch to publication. Unfortunately, my copy has gone AWOL, so I can’t check.

The lesson is that a proper understanding of a contract requires two types of reading.

Two ways to read a contract

The first type consists of reading the contract, slowly, from top to bottom. Consider each clause in turn. Ask yourself, ‘Do I understand this? Does it work for me?’

The second type of reading requires more subtlety. Read the contract again, focusing this time, not on individual clauses in isolation, but on how clauses relate to each other.

Often the full significance of a clause becomes clear only when read in context.

Illustration

An example from FM concerns the relegation release clause.

I don’t like this clause and try to avoid including it in a contract. The reason is that it can reduce the incentive to fight against relegation. The player might begin to feel that relegation doesn’t matter so much: if the club goes down, the player will just move on.

But if the player insists on retaining the clause I will seek to balance it with an ‘avoid relegation’ bonus. I make extensive use of this bonus in any case, but if I’m worried about the relegation release clause I’m likely to be exceptionally generous with the bonus.

That way, the player has the benefit of feeling that he has some protection against being stuck with a failing club, while also being incentivised to ensure that failure doesn’t arise in the first place.

The habit of juxtaposing one clause with another, in order to see how they work together, is I suggest a key skill for contract negotiation.

Previous post in the series: How negotiating contracts is like juggling.

Next up in the series: Unintended consequences

Image credit: Image credit: ‘Contract key’ generously made available by CreditDebitPro under a CC BY 2.0 licence.

 

Leave a response

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.