Wednesday, September 08, 2010


There is a reason we ask for signatures on contracts. Or at least an email confirmation.

Read more from Harvey Mackay:

When a handshake isn't good enough

By Harvey Mackay

Agreements prevent disagreements. If you are a regular reader of this column, you have likely heard this before. It's one of my core beliefs, yet it's amazing how many people don't heed this advice.

I recently received an email from one of my regular readers in Louisville, Kentucky. He wrote: "I have seen it happen so often, especially in real estate. Both the seller and buyer agree on a price, terms, conditions and usually it will be a simple smooth closing ... I have seen many deals that were lost where the attorney or the client start playing games of demanding things that weren't in the contract (after everyone agreed) or they say they will 'walk.' As you know, this happens in almost every business, if not by the boss, then a manager or employee. Most of the time it is NOT the money that motivates this action -- it is the excitement of 'Winning Always,' to outsmart others, to get the upper hand. These people are never satisfied with a simple win/win."

While this statement may resonate with a lot of people, the bottom line is once you have a deal, you can't change the rules in the middle of the game -- unless the rules themselves were unethical. And shame on you if you originally agreed to shady terms.

Every now and then you will find yourself dealing with one of those slick types who says he doesn't want a contract and "your word is good enough." Maybe yours is, but his usually isn't.

I've learned a few lessons the hard way. In my early business days, I had a handshake-deal with a man I hired. He agreed that he would not seek other employment for two years. After a year, what he thought was a better offer came along, and he was gone. He said that he remembered that we had agreed on only one year. How could I prove he was wrong? I couldn't.

I always strive to come to an agreement and then put it in writing. Now when I make a deal with anyone, I send a letter the same day in which I:
  1. Thank the person profusely for their courtesy, and
  2. Spell out the terms of our agreement -- "As I understand our agreement, I have agreed to do this ... and you have agreed to do that ..."
This minimizes any confusion. I don't usually ask for any acknowledgement other than to make sure they received the letter. It's just a nice, friendly, little reminder ... and a useful record if there should be any misunderstandings later. You'd be amazed at how helpful this little exercise is. Pale ink is better than the most retentive memory.

One more piece of advice: If the terms are important enough, make sure your agreement has some legal standing. Sometimes disagreements can't be settled amicably or easily, even with a written document. A good lawyer will make sure you are protected.

In a litigation-happy society, clear agreements often prevent small disagreements from becoming big ones. Unless you have time and money for an extended lawsuit, take the time up front to spell out the details. Your lawyer can anticipate scenarios that perhaps you haven't considered.

One last word of caution: Always make sure you know whom you are doing business with. You can save yourself plenty of headaches by using your head from the outset.

Several men are in a golf club locker room when a cell phone rings. A man answers the phone. "Yes, I'm finished with my game so I can talk. You're out shopping? And you want to order those new carpets? Okay ... and they'll include the curtains for an extra five thousand? Sure, why not?"

The golf buddies start to laugh.

"You want to book that week-long cruise? They'll hold the price at twelve thousand? Sounds good to me. How about two weeks? If that's what you want, okay by me."

The buddies start to wonder where he's been hiding the money.

He continues: "And you want to give the builder the go-ahead for the house addition? Seventy-five thousand if we say yes today? Sounds fair -- sure, that's fine."

Glances of amazement all around.

"Okay, see you later. Yes, love you too," says the man, ending the call.

He looks at the other men and says, "Whose phone is this anyhow?"

Mackay's Moral: A solid agreement keeps a meeting of the minds from becoming a clash of wills.

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