“FORMALITY LANG YAN, MAY USAPAN NA KAMI” are words that I have heard so many times in over 20 years of law practice to describe contracts between parties who are about to embark on anything from starting a new business partnership to the purchase of properties and every possible legal relationship in between.
The funny thing is that a substantial number of the cases that I have handled over the same period of time arose between former friends and business partners who have become bitter enemies on opposing sides in court passionately shouting “HINDE YAN ANG USAPAN NAMIN!!!”
“THE PALEST INK IS MORE POWERFUL THAN THE STRONGEST MEMORY” goes an old Chinese proverb that is often cited by law professors teaching Evidence or the aptly named “Statute of Frauds” in Civil Law which requires certain contracts to be in writing in order to be enforceable.
This Chinese proverb encapsulates the very reason and purpose behind executing written contracts. It is an undeniable reality that people change and even the best of relationships can turn sour. Human memory fails or fades over time and, more often than not, a person will, whether consciously or unconsciously, remember the terms of an agreement in a manner so as to suit his own purposes. Rare is the person who can, in all honesty, truly claim that his word is his bond.
Thus, a written contract is supposed to list down the terms and conditions that have been agreed to by the contracting parties in clear and unambiguous language. A lawyer who is adept at contract writing must always play devil’s advocate by covering the “WHAT IFs” or the many possible situations that the parties may find themselves in while in the course of implementing their agreement including possible disagreements between them.
On the other hand, a contract that is composed under the presumption all the parties are acting in good faith and that the good relationship between them will hold true for the entire duration of the contract, will usually end up being a bad contract.
A very common example is the fact that parties to a contract of sale of land often end up arguing about who is supposed to pay for the taxes and expenses involved in transferring the registration of the title over the property to the buyer. Actually, in the absence of any stipulation, the law presumes that it will be the seller who assumes liability for such expenses.
However, problems will arise if there are unclear or vague stipulations that seem to cover it but, in fact, create more confusion than clarity.
In one such situation that I witnessed in court, the problem arose because the purchase price was described in the Deed of Sale as “NET PURCHASE PRICE” without specifying what the price is supposed to be “NET” of. The seller was saying that the price was “NET” of all the national and local taxes due on the sale, as well as the other expenses of registration, while the buyer was saying that “NET” just meant that the purchase stated price was over and above, or “NET” of, the money that he had previously lent to the seller.
I remember thinking to myself that their problem, as well as the presumably substantial expenses involved in having to go to court over all this, could have been so easily avoided if their contract had been more specific.
The situations created by poorly written contracts often arise when the contracts are made by unqualified persons pretending to know what they are doing.
Nowadays, there as so many “internet lawyers” who just download legal forms from various websites under the belief that such contracts are already sufficient. People like this are usually impressed with the “legalese” in such sample contracts that they do not even understand. I have even seen a Contract of Lease over a property in Davao City that had a stipulation that the contract would be governed by the laws of the State of New York, U.S.A.
The moral of the story is simple enough. People should understand that contracts are not mere unimportant formalities but are intended to govern the relationship between the parties with regards the subject matter of the contract. Contracts should contain, in very specific terms, everything that the parties have agreed to and should include what to do, or what will happen, if the covered transaction does not proceed as planned.
The way to do this is to have the contract drafted by a lawyer with sufficient experience in contract writing and who, before having the parties sign the contract, should explain each and every stipulation so that neither party can, in the future, claim ignorance about it.
People usually try and avoid going to a lawyer for fear of the added expense. If you think this way, think it through so that you will realize that you are actually sparing yourself from the much more expensive possibility of having to hire a lawyer to defend you or prosecute your claim just because of a BAD CONTRACT.
You never know, you might even end up having to study the laws of the State of New York, just because you pinched a few pennies.