Back Door Contract Engineering

"against the big, the pretentious, the powerful. He wrote complex agree- ments containing understated language which gave his clients latent powers or maneuvering room—what he called "back doors"—the kind of language that gave McCaw Communications an escape or jujitsu leverage over other parties if problems developed."

"McCaw didn't want only one exit if a deal went sour, for example. He wanted multiple exits tied to different scenarios. Since the McCaw holdings were an intricate web of corporate entities and debt, if prob- lems erupted in one end of the company, McCaw wanted mechanisms "to blow up a deal," Perry says. Ordinarily aloof from particulars, these were the granular details that McCaw examined and discussed speck by speck."

"Such a deal faced likely resistance from other phone companies, but the first obstacle loomed within McCaw's own boardroom. London-based British Telecommunications PLC held three seats on the McCaw board of directors and owned 17 percent of the company. BT believed it held veto rights over any sellout deal. But Perry had a "gotcha" ready if BT ever posed a problem. Deep within the volumi- nous agreement between McCaw and BT was a brief, obscure clause that gave McCaw tremendous power. In it, BT promised not to oper- ate any business that competed in the United States with McCaw. Since the provision was not limited to cellular, McCaw had the right to enter any business it chose—integrated data networks, for example—and force BT to abandon it. "I just don't think they understood," Perry said later. "It's not unusual to have incredibly complicated documents that have provisions that come back to bite people if they don't pay attention.""

"The increasingly nasty dispute went to arbitration, and the aquar- ium ultimately discovered an old lesson about dealing with Craig McCaw: Always read the fine print. The contract between the aquarium and the foundation gave the latter sole power to decide when and where to move Keiko."