Contracts for Startups 101

If you can read code (any type of code), you can read a contract. Yup – that’s right, contracts and coding have a lot in common. In fact, many of the skills I learned as a web programmer have helped me with drafting contracts. Show some code to a lawyer, and they’ll probably look at you like you’re from Mars. Show a contract to a programmer, and they’ll probably think the same. But at the end of the day, coding and contract drafting are extremely similar exercises that rest on having a logical base on which to build upon. So with that in mind, I thought it would be useful to have a short post on how to read a contract if you see things through the eyes of a programmer.

Variables are an integral part of any code. You set your variables up at the beginning in order to be able to use them later on. Let’s take an example for a financing:

$var1 = 100000;
$var2 = 50000;
$total = $var1 + $var2;
//Output on page
echo “An amount equal to $”.number_format($total).” shall be invested by the Investors in the Corporation.”;

(Go ahead and test it. It works!)

What did we do here? Variable 1 is $100,000. Variable 2 is $50,000. So when the script runs, the number $150,000 appears as the result after the dollar sign. Now let’s take an example using contract drafting:

“Investor 1 Amount” means $100,000.
“Investor 2 Amount” means $50,000.
“Total Investment” means the sum of the Investor 1 Amount and the Investor 2 Amount.
And then, in the body of the contract, you would have “An amount equal to the Total Investment shall be invested by the Investors in the Corporation.

In each case, we need to define variables to use them in other parts of the document. The code actually produces a number. Contracts don’t do that, so we simply restate the defined term instead.

But as you can see, the logic of programming applies to contracts in a very similar fashion. Hopefully, if you can understand programming, this post has helped make reading contracts a little less daunting.

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