Phoenix lawyer Mark Briggs on how to navigate contracts in the business world.
Every field has its clichés. In athletics, it’s “records are made to be broken.” But in business, it’s “contracts are made to be broken.”
The sad truth is that in business, contracts are broken fairly regularly. Many times, a business simply is not able to honor its obligations due to financial duress, accidents or poor planning. Let’s face it: a lot of businesspeople are a little too optimistic, and do not adequately assess the risk of a situation. In addition to these inept-but-well-intentioned businesspeople, there are also those morally bankrupt folks who enter into contracts intending to break them—or will break them if they think they can get away with it.
So, how do you protect your business from the damage that broken contracts can cause? I have a couple of suggestions.
If an agreement is important to your business, get it in writing and signed! This does several good things: First, putting the agreement in writing cuts down on miscommunication between the parties about the specific terms of their deal. Second, by taking the time to put it in writing, you and the other person will think more about whether you should even enter into the agreement in the first place. Lastly, putting contracts in writing will make the bad guys think a lot more before they try to break the contract. An oral agreement is like catnip to unethical businesspeople, and those jerks have no problem denying an agreement even existed—or completely changing major terms of the deal. Don’t be easy prey for them!
Even if you have a solid written contract in place…well, as my grandfather used to tell me: “You can’t do good deals with bad people.” The best people will do the right thing no matter what the contract says, even if the contract is not in writing. Meanwhile, the worst people would breach an agreement written in their own blood if they think it would benefit them. Most businesspeople fall somewhere in-between those extremes, so try to know as much as possible about the ethics and competency of everyone you contract with. Before signing any agreements, ask for references from their customers, suppliers or partners.
Have you ever been involved in a breach of contract situation? How did it impact your business? Did it go to trial? Share your experience in the comment section.
Photo Credit: Frank Bodden