A Case of Cigars

There’s an anonymous story of a lawyer in the US who purchased a box of very rare and expensive cigars, then insured them against fire among other things. Within a month having smoked his entire stockpile of these great cigars, the lawyer filed claim against the insurance company. In his claim, the lawyer stated the cigars were lost “in a series of small fires.”  The insurance company refused to pay, citing the obvious reason: that the man had consumed the cigars in the normal fashion.  The lawyer sued and won!

In delivering the ruling the judge agreed with the insurance company that the claim was frivolous. The Judge stated nevertheless, that the lawyer held a policy from the company in which it had warranted that the cigars were insurable and also guaranteed that it would insure them against fire, without defining what is considered to be unacceptable fire, and was obligated to pay the claim.

Rather than endure lengthy and costly appeal process, the insurance company accepted the ruling and paid $15,000 to the lawyer for his loss of the rare cigars lost in the “fires”.

Now, the thrilling part.

After the lawyer cashed the cheque, the insurance company had him arrested on “24 counts of arson”!   With the lawyer’s own insurance claim and testimony from the previous case being used against him, the lawyer was convicted of intentionally burning his insured property and was sentenced to 24 months in jail and a $24,000 fine.

As much as this story seems funny, many of us may not realise that an insurance policy is lawfully a contract between the insured and the insurer.  Moreover, many of us may not give much credence towards being familiar with essential legalese in our professional and personal lives.

For those non-legal professionals amongst us who have to draft contracts or read, understand and perform per the provisions of a contract (say, an Account Manager, Delivery Head, Project Manager, Practice Head or a Sales Head in an IT Services firm), being amply clear about what makes a contract ‘valid’ or ‘void’ is vital.  Likewise, knowing the differences between an ‘agreement’ and a ‘contract’.  Or clearly knowing what elements constitute a well-constructed contract and knowing what principles back such contracts.

“All contracts are agreements but all agreements are not contracts.”

Being absolutely clear and at ease with terms like ‘acceptance’, ‘ambiguity’, ‘arbitration’, ‘breach’, ‘competent persons’, ‘consideration’, ‘duties and rights’, ‘fraudulent’, ‘free consent’, ‘legally enforceable’, ‘limits of liability’, ‘mediation’, ‘mutuality of obligations’, ‘offer’, ‘party’, ‘performance’, ‘remedies’, ‘unlawful’ and a few more - would play a huge difference in confidently, responsibly and successfully performing one’s role.

In our data-heavy digital world, with increased competition between yester-year tech firms, new gen tech startups, SaaS based platforms and many more - all offering innovative products, platforms, solutions and services - the nuances of business Contracts too are also rapidly changing and constantly evolving. 

Many lawyers and legal professionals are bracing themselves up to become familiar with today’s technologies and to know how businesses and services are shaping up by adopting such technologies. Likewise, a systematic investment plan by roles that matter in tech firms and tech services organizations - towards gaining a clearer understanding of “Law and Legal Systems” - will immensely help in staying on course and in navigating towards the desired outcomes.