I recently gave a presentation on the “Five legal issues you must understand when doing business in the U.S. at Web Hosting Day. In the next five blog posts, I’m going to summarize my points. For those of you who are interested in hearing them in person, I will be presenting a version of this presentation in mid-May at the Cloud Computing Expo in Prague.
Lesson #1: Contracts are Interpreted by the Terms.
Many countries in Europe, and around the world for that matter, have statutes that either require that particular clauses be included in a contract, or, if they’re not, infer them by statute. U.S. contract law generally does not. While there are a couple of provisions, or more likely, theories, that may be implied into a U.S. contract, the vast majority of U.S. contracts are governed by the “four corners of the document.” Basically, what you negotiate is what you get.
This difference often trips up non-U.S. companies. Addressing it means two things: first, you must step up to the plate and try to negotiate on equal terms. When dealing with companies in the U.S., or contracts governed by U.S. laws, you cannot, and should not, assume that courts, or the law, will consider the fact that there was unequal bargaining power in the relationship – and adjust the contract accordingly, or impose statutory terms.
Second, you must pay close attention to the wording of the contract. For example, any ambiguity in the contract is not likely to be interpreted in your favor – or anyone else’s favor. Ambiguous contract provisions will not be replaced by a statutory provision that might have the same meaning. Indeed, many judges will not interpret the provision, but will just remove it.
No one interpreting the contract is likely to try to determine what the parties meant when drafting the contract. Nor will many judges or arbitrators look at documents outside the contract to determine meaning or what the parties intended to do. This concept is extremely important. I always tell clients to remember Ronald Regan’s statement: “trust, but verify.” Don’t accept statements like “we have a reputation to preserve in the industry, and would never do that;” or “we’ll address that issue once the server is deployed.”
9 times out of 10, a statement like that indicates someone is hiding something, or, at a minimum, is unwilling to spend the time to negotiate a provision addressing your concern. If you hear these things, take the time to try to understand that other party’s position, then offer to draft a provision of your own. Unless your concern is covered in writing in the contract, the statements made by your partner will carry no weight should a dispute arise.
Next up: Lesson #2 – Understand a U.S. Lawyer’s role.
About David Snead
David Snead is a lawyer whose practice is focused on internet infrastructure providers. In his eleven years in this practice, he has represented clients including multinationals, middle tier hosting companies, and two guys, a server, a T-1 and a huge MasterCard balance.
A long-time WHIR contributor, David Snead is the Web hosting business's best-known legal expert. Through his WHIR blog, he offers a credible legal perspective on both specific actions in the Web hosting business and general developments in legislation.
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