In business contracts, is it better to ask for permission or forgiveness?

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In typical lawyer-speak, the answer to the questions is…it depends. In a few recent transactions, this question has come up for my clients and I think that with contract negotiations it is important to view each transaction differently. In knowing that no contract is identical to another, you will be empowered to better negotiate to your benefit.<!–more–>

One way to analyze the question is to consider who has more power in the transaction. For example, if you are a prospective tenant negotiating a commercial lease, typically you will have less power to negotiate particular items within that lease. Accordingly, it may be better to keep some of the broad terms within a lease agreement. In the event that some of your expected use of the property is not specifically mentioned, you can later argue that it was not prohibited; thus you remain in compliance with the lease.  However, if there is some use of the property that is extensive, you should make sure to include that term in negotiations and make sure that it is fully spelled out in the contract. So much depends on the relative power of the parties to the contract, the scope of the contract, and the risks associated with ambiguous terms within the contract. Ambiguity may be to your benefit or detriment depending on what is ambiguous.

Sometimes lawyers will put provisions into a contract that may seem innocuous but are intended to be a bigger hammer in the event of a change in circumstances. To an innocent reader, there may be no hidden weapon within the agreement. This is one of the reasons that it is important to have an experienced and skilled business attorney on your team when negotiating or signing contracts. Each word within a contract means something and may contain a potential pitfall for you and your business. If you are unable to see the hazards, you are more likely to be adversely affected by them.

So the bottom line answer to the question remains…it depends. However, it is more important to know the factors that go into the answer rather than the answer itself.