A Rose By Any Other Name (Part 2)

handshake deal

Recently, in response to a question about contractual risk management posted on LinkedIn, someone responded with a rant about how lawyers screw businesses up and the legal system deprives folks of their rights, ending with an admonishment to avoid lawyers and courts altogether by – get this – never using a contract.      

 Hmmmmm . . . . Interesting concept.  I wonder why the concept hasn’t been universally accepted by business owners everywhere? 

 Maybe because it’s impossible.

 You could, of course, try never using a written contract.  If your vendors, suppliers and subcontractors will all agree to that, of course.  Meaning not only that every agreement is sealed with a smile and a handshake, but also that folks you owe show up in person, stick their hands out, and you pay them on demand, with cash money. 

 You’d still fail.

 Because even if you were scrupulously careful not to put anything in writing, ever (not a letter, e-mail, napkin, paper airplane, not anything), and even if you could convince every one with whom you do any sort of business to do the same, just reach an agreement as to terms, smile and shake hands, and you may very well have just formed a contract.  That’s right, a contract, whether you like it or not, and with terms which, since they are not written down, are so nebulous, such a moving target, that they  just might have to be decided in an adversarial setting such as a courtroom, based on “he said, she said” “evidence”, by someone who had nothing to do with negotiating the agreement, has no relationship with any of the parties, wears a flowing robe, sits behind a high desk, gavel in hand, has a decidedly authoritarian attitude, and has the power to seriously detrimentally impact your bottom line. 

 A contract by any other name . . . is still a contract.  You just can’t do business without one.

 Even if I were not an attorney, my inclination would still be to advocate taking control of one’s destiny by crafting one’s own written contracts, with risk shifting provisions that comply with the laws in one’s own jurisdiction in order to actually achieve the protection one wants, as a means to achieve one’s own acceptable level of legal risk.  That’s just my personality, really.

I am a big advocate of having a system for everything you possible can in your business.  Creating and/or adopting business systems (a) forces you to identify specific business risks and goals, then (b) gives you the tools to avoid the  risks to achieve the goals, and your business contracts, if written properly, are the most important business system you (and your employees) have.  If you don’t have your own business contracts, then your vendors, suppliers, subcontractors and yes, even customers, will impose a system on you that may not be to your liking (or beneficial to your bottom line).  The solution is not to try to run away (by, for example, refusing to use written agreements).  The solution is to have your own, superior, system in place, and to insist on using it.

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One CommentLeave a comment

  1. […] What will your business buy, rent or sell?  Whatever it is, you’ll need a contract.  See here for a related post on this issue.  As discussed below, form agreements from the internet are worth […]

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