As certain as death and taxes, accountants are sure to brush up against the law in the daily practice of their profession. “Every accountant needs a good working knowledge of the every-day legal matters that affect their clients financially,” says CPE Link instructor, Paul Jorgensen, founder of a Washington, DC law firm specializing in intellectual property and contract law. “A basic knowledge of the legal concepts involving contracts, intellectual property law, and the Internet makes you a more valuable financial professional. It helps you know when to enlist a lawyer and to recognize bad or wasteful lawyering,” says Jorgensen.
When he teaches accountants about basics of law, Jorgensen likes to start with contracts. Non-lawyers often think that contracts have to sound legal and the more legal-sounding the better. Nothing could be further from the truth, says Jorgensen. There’s a lot of bad legal writing out there and bad writing should send up red warning flags.
When it comes to the language of contracts, several rules apply. One is that “Simple words are best.” Start is better than commence. If is better than in the event that. Later is better than subsequent.
Another is “Always reject the passive voice.” Passive voice leaves too many questions, never a good thing in a contract.
Bad: “Use of Services shall be paid for by Tenant. Payments shall be received monthly for such Services.” Who uses the services? Who provides them? What are the payments for? Who receives them? How much are they?
Better: “Tenant will pay Landlord $65 for the Services on the third day of each month during the term of the contract.”
Once you cut through the bad legal writing, it’s easier to understand the essential contract provisions, not only in the contracts that accountants review for clients, but also in the contracts they make.
How often do you review contracts in which your client is a party? Do you always understand them?