Trust, but Check the Fine Print

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Trust, but Check the Fine Print

If the contract isn’t clear and reasonable, there’s probably trouble ahead.

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Business relationships are built on trust. Trust is essential. While the best-written contract cannot guarantee you a successful business relationship, it can protect you from future problems.

Business relationships are complex and evolve with time.

The parties have to be able to work together to resolve issues and figure out a mutually beneficial way to proceed. The contract cannot specify every possible contingency - but it should lay the foundation for a healthy working relationship.

Many problems arise from a lack of clarity - when there’s a misunderstanding about expectations. For examples of common problem areas, see eNews “Put it in Writing” http://www.smartfast.com/enews/ea_put_in_writing.html.

If the deal or relationship is important, take the time to put your agreement in writing. The process of preparing the contract is the first real test of the business relationship - it gives you insight into how your business partner works and resolves issues. This is the opportunity to set the boundaries for how you will work together.

From my experience, if the parties are able to negotiate respectfully and their agreement is fair and balanced, the relationship will probably work.

Warning Signs.

If the negotiations are adversarial and the agreement is one-sided and has onerous terms, it’s a warning of trouble ahead. You’ll want to be especially careful about termination provisions, and what happens if you want out.

Another key warning is if the deal keeps changing and you can’t get to an agreement on the key points. Sometimes this happens because “the lawyers” make the contract negotiation process unnecessarily adversarial and create hostility between the parties. The negotiation process should be a dialogue about issues and concerns - not demands and threats. For discussion of the negotiating process, see eNews “Negotiating Tips”http://www.smartfast.com/enews/ea_negotiating.html.

If you cannot agree on a contract, the relationship probably won’t work. Better to walk away sooner, rather than later.

Check the fine print before you sign.

Do not assume that the contract prepared by one party or that party’s attorney accurately reflects your understanding of the agreement and protects you. A badly written contract, or one that you do not understand, can hurt you. So, check the fine print before you sign. It’s also wise to have an experienced Business Attorney review the contract.

Don’t let “the lawyers” derail the deal!

This is especially important if you are working with a larger company’s law department - where their lawyer gets involved at the final stages of negotiation and wants to call the shots with a “take it or leave it” approach. It’s critical to keep the dialogue going with your principal business partner. Do not let the lawyers run the negotiation. Stay focused on how the relationship will work from a win-win and practical standpoint. Ultimately, the “lawyers advise” and the “clients decide.”

In conclusion, while trusting your business partner is critical to a successful relationship, the agreement protects you from future problems. For example, if your business partner (or primary contact at your client) moves on to a new position or leaves the company, you’ll have the agreement in writing so that it’s clear what compensation you are owed.

To make sure that you understand the contract - and that the fine print confirms the key terms - you want to work with an experienced Business Attorney who facilitates, rather than derails, the deal.

Jean D. Sifleet, Esq., CPA

Business Attorney

t. 978-368-6104

f. 978-368-6105

www.smartfast.com