With agreements being the cornerstone of most business arrangements, I am surprised by the number of business owners who continue to ignore the importance of putting it in writing--that’s right, a written contract. No matter how well-intentioned both parties are, operating on a handshake is far too risky for your business.
Business agreements can be as simple as an offer, acceptance, and a handshake. You may have complete trust in the party you are doing business with, to the extent that a "handshake deal" seems sufficient, and secure. After all, business relationships thrive on foundations of trust and mutual understanding.
But what is at stake? The purpose of a contract is to outline terms and conditions that are mutually agreed upon by both parties. When you reduce those terms and conditions to writing, you will be surprised at how many additional factors there are to consider. Not putting your agreement in writing, however, prevents you from having that full discussion with the person on the other side of the deal, and sets you up for possible misunderstandings down the line. Good intentions and trust are important to business relationships, but they are not a substitute for a written agreement.
Also, consider the fact that memories fade over time. What happens if you go along the primrose path and no misunderstanding arises until a year or two later? We all know how two people can view the same exact event differently.
Last, but not least, what if your trusted party eventually does violate the terms of your agreement and you have no written agreement? This is a breeding ground for extensive negotiation and expensive litigation. Failure to put your agreement in writing is a disservice to you and your business, and undermines your chances of success.
Far from diminishing your relationships with clients, contractors, suppliers, partners, shareholders and other parties, a well-written contract enhances your relationship by providing clarity. It prevents disputes, and possibly litigation expenses down the line. Also, if you do end up litigating, a well-drafted agreement supports your success in the courtroom.
Chances are, you've heard this phrase before when entering into a business agreement. Whatever the circumstances of a business relationship, and however much you may trust the party involved, a written contract is a far better safeguard to your business' interests than a handshake.
People change, times change, and memories fade--and this reality is unfavorable to businesses who have established verbal agreements. Parties can forget the details of what they have agreed to, and perhaps even lie about the terms of a “handshake deal.”
A verbal agreement without a written agreement to back it opens up the possibility for such manipulation of terms. When a business is doing particularly well, a party might wish to reap unearned benefits; alternatively, when a business is doing poorly, a party might try to avoid the costs of a business' setbacks.
“Handshake deals” are especially hazardous when personal relationships become intertwined with business ones. Take, for example, the lawsuit between the co-founders of Snapchat, a popular social media app in which users can send temporary picture messages.
Reggie Brown shared his idea for the app with Evan Spiegel while the two men attended Stanford University. A third student, Bobby Murphy, joined the team to carry out the computer programming, and an oral agreement was made between the three. Spiegel, Snapchat's current CEO, and Murphy, CTO, ousted Brown from his role in the company, which subsequently received $1 billion and takeover offers from Facebook. Brown sued his former partners in 2013 for breach of contract, which resulted in an undisclosed settlement in 2014.
Opting for a written contract won't eliminate the possibility of disputes and misunderstandings arising. However, having a written contract to refer to in which terms and conditions are well-defined and unambiguous, greatly reduces your chances of a dispute escalating to a court setting and increases your chance of success if it does.
Contracts outline the terms and conditions of a business transaction, and include details of payment, product sales, service delivery, and termination rights. Some contracts must be in writing to be enforceable, for example, real-estate contracts and any contract taking longer than a year to complete.
A well-drafted contract can be referenced at any point to clear up misunderstandings about the agreement--misunderstandings which, in the absence of a written contract, could develop to full-fledged court disputes between the parties.
While oral contracts can still be legally enforceable, it is very difficult to do so without a clear record of the offer, consideration, and acceptance. So as to avoid the "he said, she said" court dispute, and "your word against theirs" arguments, it is always best to formalize business agreements in writing.
Not only are written agreements more easily enforced, but each party better understands its obligations to the other. The contract drafting process, in which parties review and make changes encourages consideration of any number of scenarios, before the contract is finalized. This foresight can make all the difference for the business owner invests in minimizing risk through written contracts.
contract is unique, and must be tailored to your unique business circumstances.
It is here that a legal professional's assistance can prove useful for your
An experienced attorney can provide information about the benefits that are, or should be, available to you. They can break down difficult contractual language, and can help you determine what terms you should agree to. Most importantly, an attorney will ensure that the contract itself is valid and defensible.
Verbal agreements, or "handshake deals" can pose a great risk to your business. Without a written record of the agreement, you risk problematic interpretations of the terms and conditions. And, if litigation becomes necessary, you also risk great legal fees. On the other hand, all of this can be avoided with a decision to formalize your business agreements in writing.
A well-drafted contract is a work of art. [tweet this]. With regard to the future of your business, a legal professional's guidance while drafting a contract is an investment worth making.Don't leave your small business vulnerable--protect your interests, resources, and rights with a written contract.
The driverless car industry is hot and super-competitive. That’s a given. Here’s what’s not hot if you are Waymo, the self-driving car business that was spun out of Google’s parent company:
Recently, there was a trademark spat between Adidas and Tesla. The story piqued my interest because the big players make mistakes that are instructive for small businesses (only on a grander scale)—and because it illustrates the importance of brand identity and underscores why it’s smart to register your mark.In a nutshell, here’s what happened: Tesla filed with the US Patent and Trademark Office (USPTO) to register its Model 3, three-bar logo as a trademark. If the registration had been for the purpose of using the mark on a car, there would not have been a problem. BUT, Tesla registered to use its three-bar “E” on clothing. Adidas, a company known for rigorous policing of its brand identity, challenged Tesla’s right to register the mark as confusingly similar to the Adidas three-bar logo. Tesla withdrew its application. Adidas protected its three-bar brand identity.
The Trans-Pacific Partnership (TPP) is the largest regional trade agreement in history, between the United States and 11 other Pacific Rim countries. Following in the footsteps of the North American Free Trade Agreement (NAFTA) between the US, Mexico, and Canada, the TPP expands upon this to establish new rules for global trade by eliminating 18,000 tariffs, promoting an open internet, disciplining state-owned enterprises, and establishing environmental and worker protection. Its aim is to increase Made-In-America exports, grow the US economy, support higher-paying US jobs, and strengthen the middle class.
You've probably heard references to the TPP in recent campaign coverage. It is the result of years of trade negotiations, and has been hailed as a hallmark victory for the Obama administration. However, the agreement is still in limbo, pending ratification by Congress--a delay that hardly comes as a surprise. And, both presidential candidates for the major parties have come out against the TPP. Given this, the future of the TPP is up in the air.
Supporters hope for a vote during the lame-duck session, but the TPP's passage could very likely depend on the next presidential administration. In the meantime, we are left to consider the implications of passage of this agreement, as well as its impact on NAFTA, a pre-existing trade agreement of a similar nature.
The TPP is a piece of legislation I have been closely following, and recently had the opportunity to moderate a panel entitled, "The Impact of TPP on NAFTA: Opportunity for Strengthening Ties -- Or Recipe for Disaster." Panel members included Aristeo Lopez of the Mexican Embassy, Laura Sierra of Alston & Bird, Nicholas Guzman of Drinker, Biddle & Reath, and Greg Kanargelidis of Blake, Cassels & Graydon.
The American Bar Association Section of International sponsored this event with the intention of presenting US, Mexican, and Canadian standpoints on the TPP and the impact of its passage on NAFTA. What followed was a thoughtful and informative discussion, and although the topic is highly complex, I thought I'd share some highlights with you.
Ms. Sierra explained some of the political context surrounding the TPP, including that the US has historically been pro-trade, and this is the first time since 1992 that trade has been a significant issue in presidential election year politics. US FTAs are modeled after NAFTA. The agreement eliminates a significant number of tariffs that would be beneficial to US businesses, but there are dissenting voices. Some of the concerns include employment issues, the manipulation of currencies by various countries, and opposition in specific industries such as auto, segments of agriculture and pharmaceuticals and biologics whose concerns were not addressed in the agreement. For example, intellectual property protection for biologics is not included in the agreement.
Mr. Lopez pointed out the benefits of NAFTA--growth in trade between Mexico and the US, especially--and explained that the TPP is intended to expand upon this growth, with attention to subjects that were treated less comprehensively in NAFTA. Another goal of TPP, in Mr. Lopez' view, is to strengthen Mexico's ties to NAFTA and other FTA partners, allowing Mexican goods to reach new markets.
Mr. Kanargelidis noted that the TPP is not intended to replace or override NAFTA, but that the two agreements can co-exist. He pointed out US, Mexican, and Canadian businesses can operate under the clauses of whichever agreement is most favorable to them in a given transaction. For example, the "de minimis" value threshold is 10% under TPP, and only 7% under NAFTA.
An audience member posed the question of whether TPP shipments will be exempt from US Merchandise Processing Fees (MPF) like NAFTA shipments are. Mr. Guzman explained that even though TPP does away with "ad valorem" fees, US Customs might find another way to collect MPF that is compliant with the agreement. He also described the TPP's "focused value" methodology for determining goods' origin, which might be more stringent than NAFTA methods.
Opponents to the TPP often cite concerns about the Investor-State Dispute Settlement (ISDS) provision, which outlines the mechanism by which agreement disputes can be settled. Mr. Lopez explained that the TPP’s ISDS provisions are more transparent than those found in NAFTA.
At the conclusion of the panel, Ms. Sierra suggested that a full renegotiation of the TPP is unlikely, given that the agreement was difficult to reach in the first place, and that several countries have already ratified it. However, we might see some side letters that result in alterations to the text pertaining to certain issues. Panelists agreed that the TPP will pass. It’s a matter of time and final form.
The TPP has been negotiated between 12 countries who together form about 40% of GDP, and 1/3 of world trade. The agreement is of an unprecedented scope, and the implications of this agreement are huge. We will soon know if it can pass during the lame-duck session before the election, which is fast approaching!
Granville, Kevin. “The Trans-Pacific Partnership, Explained.” The New York Times. 20 August 2016. Web.“The Trans-Pacific Partnership.” Office of the United States Trade Representative. Executive Office of the President. 2016. Web.
In July, we reviewed the Defend Trade Secrets Act (DTSA) that passed in Congress by a sweeping majority, and was signed into law by President Obama on May 11—a rare piece of legislation that was largely agreed upon on both sides of the aisle!
In this post, “Trade Secrets: Part Two,” I want to emphasize the importance of understanding what a trade secret is, regardless of whether it is under the DTSA or state law. Surprisingly, many businesses I work with rely heavily on trade secrets for their economic livelihood, and they don’t know it. Not knowing and not tending to that little gold mine of yours can mean a significant financial hit to your business in many ways, not the least of which is losing your competitive advantage.
So, what are the components of a trade secret, and how do you protect it? Think of it in threes: the three key elements of a trade secret and three steps to protect it.