Wednesday, November 24, 2010

Custom Made Trouble

Good morning,

One problem we Aspies tend to run into is unwritten, unspoken customs and traditions. Sometimes it feels like getting up in the middle of the night - stepping on, tripping over and bumping your shin into all those things you didn't even know were there.

When making a business deal, we can negotiate specific, written agreements in which everything's all out in the open. And we'd better, because while oral agreements are enforceable, if a disagreement comes up we may not be able to prove they're complete. Then, a judge or arbitrator may need to fill in the blanks.


Back in 1991, before Lisa Kudrow became the household word she has been for years now, she hired Scott Howard as her manager for 10% of her earnings - on a handshake. Neither the original agreement nor either of two renegotiations was put in writing. In 2007, she terminated the contract.

End of the matter? Not quite. Mr. Howard believes that his share* of her income includes any continuing payments for projects she had done while he still worked for her. Ms. Kudrow says, in effect, "Show where I explicitly agreed with that."

Mr. Howard's response, in effect: "It's industry custom - after all, I did the work that got you the income, so I'm still entitled to my share of it. Since it's implicit custom, it doesn't need to be spelled out - it's just assumed. I took that into account when agreeing to work for you, let alone for as low a share as I did. Now you show where we explicitly disagreed with that."

An appeals court has ruled that Mr. Howard is entitled to argue on the basis of industry custom, so the case will go to trial despite the fact that neither party even mentioned post-termination payments while he worked for her. No matter who wins, both sides will pay a great deal in terms of time, stress and money, including legal fees**.

And all this is assuming both sides honestly saw the agreement differently. Neither side has accused the other of fraud, misrepresentation or unfair dealing.

The thing is, while people should explain more and assume less, no one can possibly spell out everything. We have to rest on some implicit understandings. Custom and tradition spare us a good deal of work.

Under the law, in various situations there are certain customs which are widespread enough that everyone is conclusively presumed to know about them. (For example, if you rent an apartment your payment is due on the first of each month, and that's when it needs to be received, not sent, by.) That means that if your case gets to a court or arbitrator, they won't even care whether or not you, personally, knew. Customs, even unwritten ones, in this sense are like laws - ignorance is no excuse.

If a custom is applicable - meaning if there's a custom that covers your situation and your contract hasn't specifically provided for or excluded it - it will be applied, period. And if you sealed your agreement with a handshake, you probably can't prove that said agreement explicitly addressed it. So if there was an applicable custom you didn't know about, you're pretty much screwed.

So to avoid customs and traditions we don't know about - and may not know to ask about - coming back to bite us, we should put our agreements in writing. Also, we should get advice from a knowledgeable person who can point out any customs we may have missed. Sometimes, that person should be a lawyer. All this goes double if we're new to this kind of setting (eg, if it's our first time renting an apartment).

Last but not least, while I have passed law school courses including Contracts, I am not a lawyer myself and this is not legal advice. If you have any specific legal issues, please speak with an attorney licensed in your jurisdiction, preferably one who's experienced with your kind of situation.

[*] In one of the renegotiations, that share had been reduced to 5%.

[**] Ms. Kudrow certainly will have to pay more legal fees for her defense. Mr. Howard's attorney may or may not be working on a contingency basis, meaning Mr. Howard only pays if he wins - though if that's true and he does win, it will be a substantial share.

Last but not least, for those of us who celebrate it - Happy Thanksgiving!

1 comment:

Cleminent said...

Jeffrey,

Great article, very well-written. It was interesting to read about the issue of oral agreements from the perspective of your blog audience.

I found the title "Custom Made Trouble" particularly clever! You convey the underlying issue in just three words. While you may not be lawyer, the legal community would benefit greatly from your ability to be clear and brief at the same time.

Hope you enjoyed your Thanksgiving holiday.