Have you ever had a situation where you were discussing terms and conditions of a deal or agreement and you walk away thinking you and the other party were on the same page? Perhaps you were looking to work with the other person(s) and you were so excited to start the work that you went ahead without a written agreement.
Then part of the way into the project, you discover what you thought the terms were and what they thought the terms were didn’t agree. Then the difficulties start because you didn’t write it down. Now you don’t have a written document that fully outlines the terms of the agreement.
Even when the terms are written down there can be some ambiguity in what the terms actually mean but at least when it’s in writing there is more of a chance the terms will be clear and understood by both parties than if you are simply going on a verbal discussion.
Here are a few tips to consider when making agreements and why written agreements are so important.
1. Perception is the sum of your own reality and not necessarily the truth.
What you perceived to be the agreement may not necessarily be the reality of the what the agreement actually was. In my work for the Government in Contracting, we rarely had oral discussions about anything and if we did we followed it up in writing with minutes of the meeting that everyone had to sign off on that they agreed to what was said.
We all perceive things differently. I recently made plans to see a guy I had been dating on a Sunday afternoon. I was attending an event and the plan was to call him when the event was done and stop by his house. When I called he had other plans. My perception was that we were getting together. His perception was that we must not be because I didn’t call him earlier and I wasn’t feeling great because of the cleanse I was on. Each person had a different perception of the truth.
Think about your relationships and how a written agreement or plan may have alleviated problems. Our perceptions usually don’t match up. Written agreements take the confusion out of perception.
A note about oral discussions: If you are having discussions with someone and they refuse to put answers to your questions in writing and insist on having oral discussions, you may want to avoid doing business with them.
2. Oral Agreements are harder to enforce.
Although there are instances where oral agreements are enforceable, there has to be certain legal characteristics in place in order to enforce an oral agreement. The most difficult aspect is determining what the agreement actually consisted of.
Do you remember the game in Elementary school where your teacher told one person a story and then they whispered it to the next person and so on around the room? By the time it got all the way around to the last person the story was completely different and didn’t sound anything like the original story.
That’s the problem with oral agreements. The meaning is transferred and usually skewed based on how each party perceived the terms of the agreement.
My son and I have this problem often. He will tell me I said something different than I actually said and want to argue the point with me. I call it selective hearing. I think it’s a teenager thing. I’m about to start getting him to put everything in writing so there is no doubt what I said and that he understood it! It might save time in the future.
3. Read everything in the agreement and verify it’s validity
When someone presents you with a proposal and you are looking to go into business with that person, take some time to read over the proposal and verify the terms for validity. Perhaps you don’t know the industry enough to verify, if not, find a mentor or expert who can verify what is being presented.
I see people all the time sign agreements that they don’t take the time to read. I was attending a red carpet viewing party for the Emmy’s last month and I was filmed by someone who was putting together a show for someone they were representing. They gave me an agreement to sign about the use of my image. It was several pages long and I would not sign it until I read it thoroughly. The guy was annoyed at that and said it was no big deal, just the standard stuff. I still refused to sign it so he gave me a fax number and asked me to fax it the following day.
I’m sure glad I didn’t sign it! There was one portion of the agreement that said they could use my image and likeness in a fictitious way. In other words they could make up anything about me they wanted with that footage and I wouldn’t be able to do anything about it!
The importance of written agreements can’t be stressed enough. I have personally been burned by this in the past. I went into business with someone I was in a relationship with. I took an $11,000 loan and put up the money to start the business. We were planning on getting married in the future. I didn’t think about having a written agreement about the business. We started to be pretty successful with it and then he dumped me for someone else and totally cut me out of the business. Soon after, he opened a shop and I was left with nothing.
I could have taken him to court and received significant consideration for the value of half of the business plus residual profits. I had a good case and had an attorney who was ready to go for it. I looked at the pros and cons of the case. It would have taken several months or longer. I had already experienced enough pain and grief from the loss. I didn’t want to wreak more havoc on my emotions at the time so chose to let it go for my own peace of mind. If we had a written agreement my position would have been clear on my share of the business.
The bottom line is get it in writing to keep it clear and you will avoid many of the pitfalls of oral agreements.