“Jared” had had the same attitude. Jared is an easy-going computer
geek, more interested in creative problem-solving for his tech support
clients than printing out every possible piece of paper to cross “t”s
and dot “i”s. That said, Jared had a written lease for his office
space, under which he was responsible for paying his share of real
estate taxes. Last year, the taxes skyrocketed. So when he received
the bill, he called the landlord (a college classmate) to work out a
payment plan, instead of paying the taxes in a lump sum. Because they
were friends, Jared didn’t confirm his agreement in writing, thinking
the landlord agreed to the arrangement. Yet months later, the landlord
imposed late fees for the delayed payments, and Jared faced fines
totaling several thousand dollars. Ouch!
Agreements do not always have to be in writing to be binding and
enforceable. But the most important thing to remember about
verbal agreements is this:
For verbal agreements
to work, they require the complete, accurate, and fair memory of both
sides.
Which, in reality, rarely happens. Memories are selective. And
fallible. And faulty. Have you ever had a client who ignored your
advice, made a mistake, and then blamed you for not telling her about
the potential pitfalls? Welcome to selective memory. A vendor who
provided you with thirty (30) items instead of the thirty-eight (38) you
needed? Hello, fallibility. People remember what they want to
remember, which usually is not in your favor. Ever had trouble
remembering the name of someone you met repeatedly at networking
events? You can thank your faulty brain cells.
There are a number of significant deal points that Jared and his clients
might recall differently, because of selective, fallible, or faulty
memory, such as:
1.
The
number of hours of computer tech services that Jared would provide
2.
How much
time Jared would have to respond to a technology “emergency”
3.
How much
Jared would be paid and within what time frame
4.
Whether
an agreement would automatically renew unless cancelled within a
particular time frame
5.
Whether
there would be penalties for non-payment
6.
Whether,
as with the landlord, they decided to make any changes to their
previously agreed-upon relationship
7.
If there
were any special arrangements that were not standard in the industry,
such as the whether and how much interest Jared wanted to charge on
outstanding balances
8.
How you
would handle disputes, if any arose
Any one of these areas can create a contentious “he said, she
said” situation if your respective memories don’t agree. And these are
the “honest mistakes.” Verbal agreements give you little defense
against those who would actively seek to “burn” you, if that’s the
scheming way they choose to conduct their business.
Finally, don’t ignore the costs to your personal
relationships if you are doing business with family or friends, as Jared
did. People tend to take for granted that their friends and relatives
are “on their wavelength” when it comes to doing business. Especially
with closer relationships, do not assume anything. Be
extra careful to treat the deal like you were working with a stranger.
What you risk is not only the deterioration of the business
relationship, but the personal one as well. That’s a high price to pay,
when it could have been solved easily and wisely by putting pen to
paper.
©
2005 Wise Counsel Press LLC . Nina L. Kaufman, Esq., is a small business
attorney and the founder of Wise Counsel Press LLC , which offers
easy-to-understand legal strategies that protect small businesses and
save them money . . . wisely. To learn more, and to sign up for their
FREE how-to articles and FREE audio class, visit
www.WiseCounselPress.com.
