Diligent People Reveal The Sneakiest Clause They Ever Found In A Contract.
While we like to believe that most people entering business want to be fair and honest, ultimately it's about money and power. What a dirty world business can be sometimes. It certainly would make lawyer's jobs ten times easier.
People on Reddit were asked: "What is the sneakiest clause you've ever found in a contract?" These are some of the best answers.
I reviewed a business sale contract once for the sale of a convenience store.
The attorney who drafted it added a provision that he be allowed a six pack of beer of his choosing for free every time he visited the store. When I pointed it out to the client and confronted the other side, it was communicated to them that their lawyer added that "to see if anyone was actually reading it."
It was funny, but I thought exceedingly unprofessional.
When the NBA and ABA merged, the owners of the St. Louis Spirits negotiated to receive one seventh of the annual TV revenues for each of four new NBA teams IN PERPETUITY. This was about 300 grand per year at the time, but by now has made them around $255,000,000.
I am an attorney, and I work for a large university. A few years ago, the university bid a near-exclusive dining services contract that applied to every part of campus except the libraries. Company A won the campus-wide bid. When the libraries bid their dining services, Company B (Company A's main competitor) won the bid. Company B's contract had several exhibits. One of the exhibits was a technical exhibit (e.g., how many ovens they would have, number of employees, etc.), and in the middle of the last page the technical exhibit, in about 6-point font, it read: "University hereby terminates its contract with Company A, and hereby appoints Company B as the exclusive provider for all dining services."
We caught it and deleted it.
Before everything was digital, you would get your coverage papers from the insurance company in a big stack of papers that would normally get thrown out. At the bottom of each page was a number and a dash stating when the page was placed into the packet. Some were much older than others.
When I got into a nasty car accident, totaling my car and beating me up pretty good in the process, I thought I was effed. I had no insurance, and as soon as the hospital I was in found out, they took all the braces and crutches away and all but kicked me out with a substantial bill.
Beaten and broken, I began reading through my coverage and happened upon a certain clause starting that if I was in an accident and safety bags were deployed and I had my seat belt on, I could receive a special medical coverage up to a quite large amount.
I called the company and spoke with a bunch of people who said that clause was no longer valid. A day later, I got a call, from what I'm guessing was a lawyer or someone high up. Apparently, a couple hundred packets had gone out with this clause that had expired 5 years earlier. They said they would send a check, but that they were ending their relationship with me and that I had to sign things to "absolve" them.
Anyway. Always read the fine print and always call and ask.
My company was switching to a different payroll provider, and they had 3 pages of items like "We are not responsible for the safety of your employees private information, including Social Security numbers and banking info." When we asked them about it they played dumb, then got really aggressive, then finally told us they didn't want to be sued if they got hacked or had a disgruntled employee take payroll information with them when they left. Needless to say, we did NOT sign with them.
Mark Zuckerberg was an equal stake founder of Facebook in its younger days with Eduardo Saverin. 60/40, something like that. Eduardo got sneaky and dropped his responsibilities almost completely, and started sneaking ads for his new start up, J***** (can't remember) into Facebook without Mark's permission, which he was developing behind Mark's back while he was supposed to be working on Facebook. If you remember the older days of the Internet, ads were extremely unpopular and could easily drive away the hard-earned user base of the tiny start up. Mark was livid as Eduardo had been slacking off and giving excuses for a long time coming. Now this.
After discussion with his angel investor, Peter Thiel, they sneaked a clause into a new contract, which was only supposed to readjust equity (very common when seeking investor funds); giving Mark the ability to vote by proxy on Eduardo's shares on all material matters (as per Company Law). Mark then set up a new company in a different state to acquire the original company, used Eduardo's proxy votes in the old company to approve the merger, then gave Eduardo a 0.02% stake in the new company. Nobody else's equity stake was changed (Eduardo's stake was given to a new investor, the one Mark flipped off in the movie). Effectively kicking only Eduardo out from Facebook.
After the events of the movie, Eduardo's stake was restored to 7% from his original 22% before the shenanigans. He is now worth north of $4bn, which could have been $20bn+ if all this hadn't happened. If you've watched The Social Network, you've seen the proceedings.
One of my friends is a lawyer who does pro-bono work for a debt management place. One of his clients was a man who had a much older friend who had no living relatives. As the old woman grew older, she gave the man power of attorney for her, so he could help take care of her and make decisions for her. She eventually had to be put into an assisted living home. As her power of attorney, he signed to put her into the home.
After several years in the home, she passed away (He still visited frequently and was a pretty good friend.) The assisted living home, however, never received payment for the last year of her assisted living, and started to aggressively pursue this man for the payments, which after late fees and such, started to top out at over sixty grand.
He came to the debt management place, and my friend looked at the contract for about twenty seconds. He asked what his relation was to the woman, and he said "none." Turns out the contract specifies charges and fees carrying over to the patient's spouse and/or next of kin, but that's it. They probably shouldn't have let him sign to admit her. The judge took one look at the contract and threw out the case.
I worked on a huge white collar criminal healthcare fraud case. The chief legal counsel of the HMO ended up being one of the defendants. Years earlier he had negotiated an indemnification clause that required the company to pay for his legal defense to the criminal charges. If the company tried to challenge its obligation to pay for the defense, it would have to pay for his legal fees to defend the challenge. It was ironclad and ended up the defendants tens of millions of dollars in legal fees.
Ironically it was in one of my own. At the time I was in law school and my SO and I were living in an apartment. The apartment was okay, but it had really bad plumbing which was connected between apartments (we were the top apartment.) Anyways, one day the plumbing burst in the apartment below us. The complex said that we had been putting pasta down our drains and there was a clause in our lease which stated that they could fine us for damaging the plumbing by putting pasta down the drains. Not grease, not hard objects, not human waste, pasta.
Luckily, I got us out of it, but it was incredibly ridiculous that I had to argue with him about it.
My parents, in reviewing the contract on a house they were buying, found a clause that said they had to keep all the cats. 3 long haired cats. My mom is allergic to cats.
They took it out... but left the cats behind anyway.
In my college days I signed a lease that read, "No parties with kegs containing 10 or more people." We decided to host a huge kegger, and smartly, we didn't put anyone in the kegs.
I worked for many years for federal government departments. These departments, particularly the higher levels of them, would often hire expensive consultants for various reasons or projects. After all, what the hell, it was only taxpayer money, and it was useful to hire expensive consultants so that when something all fell apart years later, those responsible could say "It's not our fault; we hired a really expensive consultant!"
Anyway, in order to cut down on excessive hemorrhaging of money, a rule had been put in a long time ago that if a consultant was engaged for a short time, they could be paid hourly rates (which were pretty wallet-gouging), but if they continued to be engaged by the department for more than a certain period (six weeks, I think?), they were to be switched to a much less expensive longer-term contract. Essentially, swapping higher rates for a more stable income source.
One specialist consultant we heard about was brought in and, to justify his rather high hourly rates (somewhere north of $400ph), was assigned to assist multiple important bosses in multiple areas so, theoretically, he'd never be idle on the government dollar. So far, so standard.
Except that when the time came around for him to be switched to the long-term contract, all the bosses of his who could have signed off on the change assumed it had already been done by one of the other bosses, and didn't really want to chase it up personally because hey, it wasn't coming out of their budget, and it was additional work which, if ignored long enough, someone else might do. Also, if any of them did do it themselves, it'd be admitting that they had more free time than their contemporaries, and their own bosses would find more work to take up that free time whether it existed or not.
So no-one signed the changeover.
And the consultant very conscientiously came in early, signed out late, submitted his timesheets, and kept being paid at the hourly rate.
For over a year.
When an audit finally spotted what had happened, they tried to sue him to reclaim part of the million-plus dollars they'd paid him over that time. Unfortunately for them, the contract was pretty much airtight, and nowhere in it did it mention that it was for a maximum time only or that after six weeks he should be switched to the lower rate - that was merely a departmental policy, not law.
Of course, they canned his existing contract ASAP, and didn't invite him back, but somehow I don't think he was too worried.
When my husband and I rented our first house the leasing company was owned by a group of attorneys. They put "must return property in the same or better condition" which is pretty much impossible in a home over a years time and apparently illegal for a rental contract in Ohio. They tried to charge us $300 over our deposit and threatened to sue us for it. We got our own attorney and they backed off.
I had a lawyer friend who leased a car from a dealer that had a really poorly written contract. Depending on how a car lease is written (and maybe depending on what state you're in), the dealer either continues to hold title to the car while it's leased to you (with the contract giving you right of possession) OR you hold title to the car while the dealership has a lien on the title so that ownership returns to the dealer at the end of the lease.
This contract gave the dealer the lien, rather than the title, BUT the way it was written, the entire contract expired at the end of the lease term, including the provision that returned the title to the dealer. So essentially, the contract disappears, my friend is left with both the car and the title to the car, the dealer has no legal rights to the car.
The dealership called her up and asked when she would be returning the car, she says "I'm not." They said "Oh, you're buying the car then?" She says "No I'm just gonna keep it, thanks."
The dealer sued her, then realized they screwed up the contract, and offered to settle. Since she wasn't completely confident that a judge wouldn't just find a way to justify giving the car back to the dealer (since this was pretty unfair, after all), she settled but the settlement ended up being her buying the car for like 20% of its value.
A prof. of law at Uni, Denmark, got rid of a parking ticket, because the sign read 'No parking in both sides of the road' and as he proclaimed in court, he only parked in one side of the road.
I'm a lawyer. It is my habit that, when somebody in any retail business hands me a form requiring my signature, I return it to them unsigned. If they notice and ask then I don't put up a fight, but this practice has helped me immensely in the past.
Most recently, it helped when I tried to ship a golf club to a friend who had left it at my house. I get it boxed up, go to UPS, and get the person to ship it. They hand me a form to fill out with the standard "we aren't responsible for your crap" clause, and I didn't sign it. The clerk didn't notice.
When it showed up at my friend's house in 2 pieces (seriously...what did they do? Fold it in half?), I called UPS to complain. They said "but you signed a contract blah blah blah", to which I replied "Good luck finding one with my signature on it." In the end I was able to negotiate $400 out of them, since replacing one iron in a set of golf clubs is pretty tough to do.
I have no ethical qualms about this. They are depending on the consumer either not understanding or not noticing the important clauses in their contracts, so I feel it is pretty fair when I depend on their employees to do the same.
In grad school I was DESPERATE to find a cheap apartment. Since this was pre-Craigslist, I got a post from a literal bulletin board at the school. Met up with the girl who had the room, seemed fine, seemed ok with me, so I sign papers for the place. Then I moved in.
Once moved in, she had all these extra rules for me. Put my TV downstairs in the basement, use the bathroom down there, etc. was sick one day and used the upstairs bathroom (directly next to my bedroom) and she started yelling at me, yada yada yada, I needed to leave.
I looked at the lease I signed and it said "This contract is null and void if rent is not paid by the 7th of the month." So I just moved out. I left a note letting her know what was up and she called me screaming "That was for MY protection, not yours!"
My girlfriend had a short stint as a swimming teacher. In her contract it declared that if she quit after working 4 shifts, she would owe the company 1,000 bucks.
She quit after 3.
"[Party] agrees to supply Tea and Biscuits to company personnel making site visits for the purpose of carrying out the provisions above"
I was one of two people working in a small business and had been asked to draw up and Operating and Maintenance contract that we were to send to a larger company, who wanted to hire us to do something. This was something I was utterly unqualified for, and we couldn't afford to have a solicitor do it, but I made the best shot of it by trying to keep it as simple as possible, what they had to pay us, what we had to do sort of thing. I stuck the above in as a placeholder for a section as an in-joke, and forgot to remove it when I mailed it on.
When we arrived to the first call out, tea and biscuits were waiting 'as per agreement'.
I once worked with a lawyer who wrote up his own NDA (non-disclosure agreement). These are usually a page or two and have very common things in them. This beast was nearly ten pages, so I went through it very carefully.
He had things in there like I agreed not to work with anyone I talked to while consulting for him, whether on his business or not. And that he had a complete license to anything I made or conceived of, even if I didn't write it down, during the time I as consulting for him.
Needless to say, I redlined the thing heavily and gave it back to him, along with a standard NDA that I typically used. We ended up signing that one.
A few years ago I was working for a small company, we occupy the entire first floor of a small building. One Monday morning we got to the office and 1/2 the floor was flooded with water because the landlord workers were moving some stuff over the weekend and broke a water sprinkler and left it that way overnight.
Lots of water damage, and we relocated the people in the floated area into the other 1/2 of the floor that was OK, we remained like that for about 6 weeks. When it was time to pay the rent, the lease contract was written in a way that we owed rent money in its entirety even if the facilities were not available, no matter what the reason was. We went back and forth and... we had to pay, and the landlord was a real jerk about it. Then I had what I consider a brilliant idea. When we filed for our insurance claim, we included the rent money in the damages, 1/2 of the rent for the 6 weeks.
Our insurance paid us, no problem. It just so happen by pure chance that our insurance carried happened to be also the insurance carrier for the landlord, and they were not too happy about the incompetence of the landlord, the lack of responsiveness, and the way the lease contracts were written; so within a few day from us receiving the check we got a lot of phone calls from the insurance people asking about the building and the landlord, and then 3 people from the insurance company came to pay a visit to the building too.
I guess they raised the landlord's insurance rate by quite a bit, he was absolutely pissed, and demanded to see the paperwork of what we filed as claims, what we told the insurance etc.. and said that he would have to increase the rent because of his insurance cost had gone through the roof, we told him to go screw himself, and moved out 3 years later at the end of the lease.
There was a story in the local paper about the lowest rent in the city. 2 people were only paying the equivalent of $84 per month to live in a 50 square meter apartment in a fairly attractive part of town. A normal rent would be well over 10 times that amount. $84 per month couldn't buy a parking space in the city.
The story was that the owner of the apartment complex wanted to sell the apartments back in 1977, but the rules were that first he would have to offer the tenants a chance to buy the apartments in some sort of housing equity partnership, so in order to discourage them from doing that, he offered them a contract which stated that the rent could never increase. Two brothers still live in one of the apartments to this day, and refuse to move out even after being offered the equivalent of $100000 each to move out. The owner took them to court but the court upheld the contract.
I almost signed a contract that was for a well paying entry level job. There was a little note halfway into the contract that if I was to get promoted then I would not be paid... as in... ever. Ever since I inquired about that they have been ignoring me.
I worked for a group of professionals. There was a falling out over pay and time off. I agreed to stay if certain conditions were met. They insisted on a contract for my next year's work.
I had already corrupted their corporate attorney. We drew up the contract together. When his secretary typed it up, he read through it and then told me that the contract obligated the corporation to pay my wages, pension, medical, dental and other benefits for the full year, but didn't obligate me to do anything in return. We put in a stipulation that it was payment for prior unpaid work.
I knew none of the over educated fools would read it and they didn't. Just signed it.
Out of the pure goodness of my heart, I believe that I actually worked 14 weeks in the next year.
Some of this material has been edited for clarity.
Whoops. That snip was just a hair too far....
Your first bad haircut probably made you want to die a little when you looked in the mirror. Imagine how the person cutting your hair must have felt. Although, maybe they didn't care at all, as evidenced by the bs excuse they gave you when you finished in the barber chair.