Good morning!

We have been so lucky this year... at least, here in the Boston area. We did not have 9 feet of snow this winter; that furry little Punxsutawney Phil did not see his shadow back in February, thereby predicting an early spring; and the Boston Flower Show, the true harbinger of spring in my book, starts tomorrow.

I intend to play hooky and make my annual trek down to the Seaport to see all those lovely flowers in bloom! No conference calls tomorrow for me... I will literally be stopping to "smell the roses!"

Cordially,

Marijo McCarthy, Esq.
President, Widett and McCarthy, P.C.
Good contracts for growing small businesses

Representations, Warranties, Covenants... What Do They Mean and Why Should I Care?

As my clients' contracts get more complex, I find myself wading through a morass of words and language seemingly designed to confuse the business reader.

Is the purpose to get these successful small business owners to throw up their hands in disgust, close their eyes, hold their noses and just sign the damn thing? Or is it to show the other party how much gibberish and arcane language an attorney learned in law school, so that a business owner's counsel is impressed (hint to those lawyers: we are not impressed!)? 

Let's try putting some of these requirements in English:

• A "representation" is: A statement of fact in the contract made by one party to the other. That fact has actually happened or it is happening now (but has nothing to do with future events). For example, you "represent" that you are authorized to sign the contract.

• A "warranty" is: A promise of the truth of a past, present or future fact. For example, you "warrant" that your "representation" of the above fact is true.

• A "covenant" is: A promise to do something or to not do something...it is an undertaking...an obligation. For example, you "covenant" that you will fulfill an agreement going forward.

Not only do each of these seemingly benign words have meaning within the four corners of the contract you are about to sign, they also carry potential risk for your company if you fail to carefully review them for accuracy before you sign or if you neglect to honor them during the term of the contract.

And, as we all know, risk = liability, which might translate into an insurance claim or, even worse, an uninsured claim if you have not fully understood each of them prior to signing the contract.

Therefore, if you see any of the three words above in a proposed contract you are being asked to sign, take these steps:

1. Slow down and read the document carefully;

2. Ask your lawyer to review it for you and explain it in English; and

3. Confirm the absolute accuracy of each "representation" of fact; be sure that when you "warrant" something, it is absolutely true; and do not "covenant" any act which you cannot or will not fulfill going forward.

Finally, give a wistful nod to the "old days," when business deals were done on a handshake!

Things We Like

Now that you have gotten that pesky contract out of the way, give yourself a pat on the back and settle in with a good novel. As always, I can recommend one, depending upon your taste for crime novels (don't worry, if your tastes run to other genres; we'll get to you in future newsletters).

In fact, it's the third in a series (best to start with "The Cuckoo's Calling" and move on to "The Silkworm," before you read the most recent, "Career of Evil," all about an English private detective called Cormoran Strike (yup, the man is as complicated and fascinating as his name), by none other than J.K. Rowling writing under the pseudonym Robert Galbraith.

Why a pseudonym for an author as famous as J.K.Rowling (you have heard of Harry Potter, right?)? As she explains, it's a way of bucking the pressure of being a famous writer and wanting to see whether the reading public would buy a new novel of hers without knowing who wrote it. (Visit the Smithsonian website and learn how something called "forensic linguistics" managed to uncover the identity of her pseudonym!)

A BBC press release describes Cormoran Strike and his milieu with predictable style and panache:

"Steeped in the atmosphere of contemporary London, Cormoran Strike's city is far from the bright lights and frenetic bustle, immersed instead in its darker, murkier side. War veteran turned private detective, Strike investigates shocking crimes together with his female assistant Robin, whose forensic mind and fierce determination he cannot ignore. The murders take them from the hushed streets of Mayfair to the literary haunts of Fitzrovia, exposing the seedy reality lurking beneath seemingly innocent societies. With each crime, they discover a little more about each other and both learn that appearances can be deceptive."

Now if that doesn't tempt you...!

About Us

Widett and McCarthy specializes in advising small business owners in the area of contracts. Whether reviewing a contract for services with your customer, negotiating a lease with your landlord or finalizing financing documents with your lender, we make sure your best interests are protected.

In addition, and for those clients whose successful growth requires a more comprehensive relationship, we act as "general counsel:" On-call when you need us as a sounding board, legal advisor and strong right hand.

Widett and McCarthy, P.C.
1075 Washington Street
West Newton, MA 02465

Telephone: 617.964.5559
Facsimile: 617.964.5529

Email Us | Visit Our Website