A Return to the Handshake?

There are five words that strike fear into the heart of every business owner. They are “Let me call my lawyer.”

I’m not talking about threats. If I had a nickel for every person who threatens “I’m going to call my lawyer” I’d be very rich. I’ve found that to be a tactic used by those who really don’t understand how to talk through a problem. Something goes wrong in a business deal. Someone has a fixed idea of what the problem is, and what the solution just has to be. When the other side demurs, they pull out the lawyer card.

Like Mattie Ross in both versions of “True Grit,” who wields the off-screen presence of J. Noble Daggett as a first line of offense, people who pull out lawyers at the drop of a hat are usually those who have never actually engaged in serious litigation.

Those of us who have been involved in lawsuits try to avoid them like the plague. We know that they quickly get out of control, as one attorney starts jousting with the other. Accusations fly, trees are made into paper at a horrific rate, and the legal bills mount with breathtaking speed.

Will Rogers once said;

“When you drive through a small town, and it has a lawyer, he is usually a man of pretty modest circumstances. Now when that town has two lawyers, they are both doing very well.”

In our business owner groups of The Alternative Board, “Should I sue?” is a regular topic of discussion. Except in the most egregious cases, the consensus is always “no.” A settlement of the differences, almost without regard to cost, is always less expensive, less time consuming, and less aggravating than going to court. Most of the time you wind up settling anyway.

So when do you really need a lawyer to set out the specifics of a business deal at the outset? First, begin with the end in mind. If the relationship is intended to be long-term, and separation is going to be difficult, costly or unpleasant for either party, you probably need a contract drafted by an attorney. If there is substantial liability to either party of the other doesn’t perform, you need a contract.

Otherwise, you might just need an agreement. When I started consulting, we drafted a service agreement that was pages long. It defined deliverables, payment terms, responsibilities and communication requirements. It said who had to provide what to whom and when, what constituted provision as required, what constituted failure to provide in a timely manner, what the corrective measures were that would be satisfactory, and what the steps were if those measures proved less than satisfactory.

The lawyers had a field day. Because it was so complicated, every prospective client had to present it to their lawyers for review. Their lawyers always wanted changes. Then our lawyers had to review the changes. Not surprisingly, it didn’t lend a real warm and fuzzy atmosphere to the beginning of an engagement.

Either the relationship worked out or it didn’t. We never sued a client if it went south, we just wrapped it up and moved on. Sometimes we did more work than we felt we were paid for. A few times I’m guessing that the client got a bit less than they anticipated. That’s business.

Now I draft my own agreements. They are typically one page. They are solely to make sure both parties understand what we are trying to do. They say “You want this work done. We do that. We can do it in this amount of time. You will pay us this amount for doing it.”

That’s about it. I’ve delivered millions of dollars worth of work with no more than that. All the additional effort of defining what we will do to each other if I don’t do the work or if they don’t pay me, the defining of which court we have to fight in, where the mailing notices have to go, whether electronic notice is acceptable, ad infinitum, is crap that is only useful if you go to court. I figure if I bill someone for services and they don’t pay, a judge can figure that out without me trying to tell him what the definition of payment is.

When a client asks me where all that nifty legal language is, I tell them my viewpoint. I will do my best to make this successful. I assume you will do your best to make this successful.  If I determine that I’ve made a mistake in my judgement of you as a client, I will move on. Life is too short to fight over it.

A one page agreement is full of holes. A thirty page contract has 30 times as many holes. Too often we lose the concept of a written agreement as a clarifier, and we try to make it into something that replaces the basic trust that underlies every business relationship. It is a waste of time.

OK, maybe I’m not quite back to the handshake, but I keep edging closer.

 

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2 Responses to A Return to the Handshake?

  1. Tim DeBlaey says:

    Well said! I can’t tell you how many times I’ve let people know that my handshake is my contract and my work is my signature.

  2. I agree. A clear statement of what we both agree needs to be accomplished is great. I find an hourly rate with a guess as to how many hours works well. It allows you to change the scope without anyone getting concerned. It protects the provider and assuming the consultant does not draw things out, usually the client gets the project cheaper because no fudge factors are added into the price to cover the unexpected.

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