The Plain English Project #2
Abilities and Rights (aka Can vs. May)
Welcome to the second edition of the Plain English Project. The first edition was a long introduction, today we get into real substance.
Before that, I’d like to highlight a few big ideas that I will hammer on repetitively throughout this series. As you read through this and future articles, I hope you will be able to identify these dead horses:
A smart small business owner should avoid getting involved in lawsuits almost 100% of the time. The potential payoff will rarely be worth the time, money and distraction. This means there will be times when people get cheated and there is no practical way to right the wrong. A smart business owner prepares for these moments, so that she can react with a level head.
A good lawyer is one who can deliver a product that is worth more than what you pay him or her. Any attorney that does not pass this test is a questionable business decision.
A clear contract keeps honest people on the same page and limits friction that naturally arises in any business relationship. A good Plain English contract can also help you calculate when a lawsuit makes financial sense.
The best contract in the world is likely useless against a bad actor. Having good partners, vendors, customers and employees is worth more than the best contracts and lawyers. Focus more time on good business relationships.
Now, onto the first topic.
“Can vs. May”: Abilities vs. Rights
Every action we take is either an ability, a right, or both. By “ability” I mean a present ability to take some action. By “right” I mean an action that a hypothetical judge would say you have the right to do under a law or contract.
To best understand this, think back to grade school English.There are things that we can do, and things that we may do. Just because we can do something does not mean we may do something, and vice versa.
The same dynamic underlies contract relationships. Consider a couple examples.
Example One: Raiding the Business Account.
Bad Billy owns a restaurant along with partners and he has control of the bank account. He occasionally uses his personal credit card to buy supplies from Costco. He can and he may pay himself back from the business account. It’s both an ability and a right.
While he’s logged into the business’s online account, with a few mouse clicks, Billy can also transfer every dollar from the business account to his personal account. He can, but he may not, raid the business account. It’s an ability, not a legal right.
Let’s pretend Billy did transfer all the business’s cash into his personal account. What abilities and rights do his partners have?
There are only two courses of action that are both abilities and rights. First, they can and may file a lawsuit against him for violating the partnership agreement. In one-to-four years, a judge might order him to pay the money back. Second, they can and may report him to the police for embezzlement. It will be the district attorney’s job to prosecute or not.
Sometimes extreme contract violations cross into the realm of criminal conduct. I once reported a crime to a rural sheriff when a contractor took a $40,000 down payment to construct a building, then disappeared with the cash. Nothing happened to the contractor. It is less common for prosecutors to spend time on business crimes. They are more complex than common crimes like child abuse and drunk driving. Business crimes also don’t win votes in elections.
Notice that the partners cannot simply have the bank transfer the money back. The bank will not put itself in the position of deciding who is right and wrong.
For extremely swift justice, Billy’s partners can hire goons to beat him until he transfers the money back. That’s obviously a can and not a may.
Example Two: Polos
My promotional printing company has a contract for a supplier, Lazy Larry, to deliver 500 white polos. The supplier, Lazy Larry, can get the order completely wrong and send me 500 red polos, or he can deliver no polos at all. He may not do either of those.
Pretend Larry sends no polos at all. What are my rights and abilities?
I have the ability, but not the right, to walk into his factory and take a box of white polos. (A can, not a may.) The only thing I can and may do is file a lawsuit against Larry for breaking the contract. Someday a judge might order the supplier to pay me the money I lost because of the failed delivery.
The Take Away
These examples highlight a harsh reality. In a world divided between abilities and rights, contracts create legal rights, not present abilities.They give the parties the right to take the contract to a court and argue about who did wrong.
The robbed partners’ rights will not help them make payroll this week. My rights against Lazy Larry will not help me complete current orders to my own customers. The contracts may do a good job of spelling out my rights, but for current abilities, they are impotent.
This feature of our legal system should alert you to choose business associates carefully. Against a dishonest and uncooperative person, even a good contract will let you down.
Thank you for reading. The next edition will be “Make Me: Why you don’t have to do anything in America until a judge says so.” Subscribe here if you’d like to receive the next article when it comes out.
Acknowledgments: A special thanks to Mike Woitach for helping me organize this piece. His style of thinking and writing also helps me as an entrepreneur to make critical decisions. Any thoughtful business owner can appreciate Mike’s writing.
I learned the painful difference between can and may from Sister Maria at Our Lady of the Mountains School in Paintsville, Kentucky. The question, “can I use the bathroom,” received a sarcastic response 100% of the time. The cover photo for this article is a homage to those days.
Notice that it is unlikely the judge will order Larry to deliver shirts. Courts do not like ordering parties to do physical actions like delivering products or completing construction work. Forced labor is generally frowned upon and arguably unconstitutional. The more common alternative is for a court to order that the losing party pay money damages to the winner.
In limited situations there are ways to create present abilities in a contract. A good business attorney can be creative and use a contract to put her client in a stronger position. That is just one example of how a good attorney can pay for herself. I’ll cover that in a future article.