What You Need to Know About the Law: Making Sense of Legal Documents, The Basics
We all need to deal with legal documents from time to time. Business contracts, wills, trusts, contracts for sale or purchase of a home, terms of service agreements on websites, privacy policies, arbitration clauses, renter's agreements, wavers. These are just some of the documents that we encounter on a regular basis.
We agree to legal terms all the time, often without realizing it. We use a website without reading the terms of service. We sign a waiver, agreeing to binding arbitration instead of litigation. We sign an agreement that allows investigation into our background without limitation for a new job.
We sign, we sign, we sign. We agree, most of the time without reading the document. Woe be to you if you sign without reading. In California, the law states that if you sign, you are deemed to have read the document that you are signing.
Read Everything First
You must take the time to read the documents you are presented with. Legal documents all contain clauses that are similar from document to document. All rental agreements will contain clauses that set out the property being rented, the length of the rental term, and the costs involved. Contracts for the sale of real property are similar, but usually contain legal clauses than just those outlined above. But from state to state, these contracts for the sale or purchase of a home are remarkably similar.
As you read legal documents you will begin to notice the similarities between them. All legal documents contain "boilerplate." Boilerplate is a slang term that refers to common provisions in legal documents. Lawyers pull these provisions out and insert them as needed into all sorts of documents. These provisions will govern how the document will be used and how it will be interpreted in case of a legal dispute, so it is important to read and understand all the provisions in a document, including all the boilerplate.
Common Boilerplate Terms and What They Mean
Jurisdiction: In case of a legal dispute, jurisdiction is the city, county, state or country that is designated as the location in which a lawsuit may be filed. It is important to know when you are consenting to a shift in jurisdiction from the state you are domiciled in to another state or country.
Choice of Law: This is similar to jurisdiction. This clause states which state's or country's legal rules will be used in the resolution of any dispute between the parties.
Terms of Payment: These provisions will dictate when and how payment is to be tendered and accepted. These are common is most sales contracts services contracts.
Severability: This clause allows a court to cut out and ignore any illegal term that the contract may have in it and still allow the court to enforce the remainder of the valid clauses in the agreement.
Notices: This clause directs how all legal notices between the parties are to be handled and it also may dictate when those notices are deemed to be effective. Must the notice be in writing? Must it be sent by U.S. Mail? Is it effective when sent or when received? These are important differences and notices must adhere to this format in order to be legally effective.
Entire Agreement: Often a contract will contain a clause that states that the written agreement is the entire agreement and that there are no oral agreements outside of the written agreement. This is important and prevents an assertion that the parties agreed to something else orally.
Waiver: This clause allows the parties to give up certain legal rights such as the right to sue. It is contained in all arbitration clauses. When you sign a binding arbitration agreement, you give up the right to sue in a court of law. These clauses are so common now and many people do not realize what they are giving up when they agree to them. Our Constitution guarantees the right to access the court system. By signing an arbitration clause, you give up that right. Big business has pushed this waiver into most contracts. Know what you are giving up, or argue against the insertion of the clause.
The last time I signed a contract, after I read the entire contract, I made sure that the other party answered all of my questions regarding each provision. If I didn't like the answer, we changed the terms. Not all contracts are negotiable in this way, but many are. Do not be afraid to ask all the questions that you need to in order to fully understand the document and its implications.
The Bottom Line
Understand each term and its implications
Negotiate for change
Sign only when you are happy with the document.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.