How Technology Can Rewrite Your Contracts

Posted on January 13, 2018 in Business Transactions, IP & Social Media

Technology is a wonderful thing – sometimes. But, as one of our clients (“Samantha”) discovered, technology can create its own pitfalls. It’s a nasty surprise when the document you thought you negotiated doesn’t say what you had intended.

Last year, Samantha independently negotiated the sale of her business to a multinational, publicly traded corporation. Within one week, more than 7 drafts of a 25+ page document, in Microsoft Word® format, flew back and forth between Sam and the corporation . . . via email. Changes were noted through redlining.

Finally, she received the final version, which she printed out and signed, and which called for, among other things, the purchase price to be paid to her in 24 guaranteed monthly installments. Or so she thought. The corporation stopped paying after 12 months. Why? Because somehow, the number “12” got substituted for “24” (even though the parties had agreed to 24).

During the arbitration we handled for Sam, we learned a couple of surprising lessons.

First, redlining isn’t infallible. The change from “24” to “12” never showed up. So Sam didn’t challenge it – but didn’t agree to it, either.

Second, the corporation insisted that Sam had created the document (that contained “12”) to try to prove that she agreed to “12” and not “24.” How could it do this? It relied on an “imbedded file label” that Word® creates to indicate the date and author of the document. The label showed that Sam created the document. But expert testimony revealed that these “imbedded file labels”, far from being conclusive proof, can be changed quite easily (once you know how)!

Ultimately, Sam had a happy ending for her dispute, but it was an expensive lesson for her – and so we share it with you:

— When entering into a contract, read it carefully. And compare later drafts with the supposed changes. This is not the time to say, “I’m too busy – just want to get the deal done”. The only thing that might get “done” . . . is you.

— Think twice before engaging in a flurry of emails. Sam’s close call could have been avoided if the documents had been exchanged by telecopier, pdf file, or (snail) mail.

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