February 9, 2015
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“Know what you don’t know” was popularized by the late Tom Clancy, author of numerous novels starring a CIA analyst turned agent turned politician. I find myself using the phrase frequently, though, when explaining to my clients how to approach a real estate or business problem.
Making good decisions – and getting good advice – requires discipline. Good decisions are based upon complete, accurate information. Sometimes it is difficult to tell whether we have enough information to make a decision, and whether we have the right type of information needed. Much of my work involves either identifying the missing pieces of information, or trying to describe in a document what happens when the missing information shows up.
Contracts, for example, are a mixture of plans, promises and rules for the unknown. We plan an exchange of performances – products for money, money for performance – and we promise when the tasks described in the contract will be performed. As events unfold in the future in unpredictable ways, the missing “facts” are subject to rules which assign the risk of future events between the parties to the contract. “What if” is the question which is answered by the terms of a contract. The lawyer tries to anticipate what events could unfold in the future, and tries to provide predictable results based upon every risk imaginable, so that the parties can assume acceptable levels of risk. It is a difficult task. Experience tells us what some of the risks are likely to be, but not all the risks.
To get the best legal services, a client should try to supply the best information to the client’s lawyer and to all other participants in the contract. Contracts are risk-allocation agreements, as much as they are agreements for the exchange of performances. The information which forms the basis of the contract, which results in the allocation of risk among the parties, should be stated in the contract so that each unique set of facts which can develop during the course of performance can be compared to the intention of the parties when they formed the contract and allocated the risk in a manner which was considered reasonable when the contract was formed. The shortest contracts may be the easiest and least difficult to form, but they also leave to future determination the way in which the risk is allocated among the parties. The less risk is assigned, the greater the likelihood that litigation will be used to assign the risk between the parties in the future.
I find that the best way to help parties “know what you don’t know” is to ask them to see the issues dealt with in a comprehensive contract previously used by someone else to describe an agreement, where risk was allocated in great detail. By starting with the most comprehensive description of a relationship, the parties can see if their circumstances require the same degree of detail, or if part of the detailed description contained in a lengthy contract template can be eliminated. The parties can find the missing information, or identify the information which will become available in the future, and cannot be considered before a contract is formed. It is always easier to discard from a template what you don’t need, than to think of, draft and add what you realize will be needed. Starting from the perspective that detail is needed to control risk is more advantageous, in my estimation, than leaving risk allocation to the future, and hope that the dispute over allocation never gets bad enough to force litigation.
As most mediators would say, it is better to make your own decision concerning the outcome of a dispute than to leave the outcome in the hands of a judge or jury. You can direct the outcome of many disputes by simply taking the time and effort to describe, as completely as you can, the manner in which you want to allocate the risk of changing circumstances or default between the parties to a contract. Know what you don’t’ know – and either find out the missing information before making a decision to enter into a legal relationship, or knowing what information is missing, plan to allocate the risk of the impact of the missing information between the parties.