The Danger of Creating Contracts

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My dad negotiated an exciting opportunity with one of his customers.  It took only 6 pages to outline the basic structure of the deal.  The prospect of moving forward together excited everyone. We all know the excited glow of a new relationship and new possibilities. They turned it over to the lawyers and the resulting agreement ended up being about 48 pages filled with all kinds of protections, legalese, and suspicions.  The parties now extremely suspicious of one other moved forward with far less trust than when they began.

When we strike initial agreements, we all simulate the positive outcomes  and we look forward to making those happen together.  We trust each other and are excited.  But the lawyers need to write it down and they have all been bitten by many agreements that started with rainbows in everyone’s eyes, but ended with thunderbolts over everyone’s head.  Their job is to make sure the agreements have proper protection and maximize the benefits for their client while minimizing the potential loss. This causes everyone to start simulating the scenario of the negative outcomes and reduces trust.

Yet trust is the fuel that allows us to work together with other people. It is the lubricant of all social interactions.  Take away the trust and all you have is friction.  This breakdown can happen much more quickly and can destroy what would have otherwise been excellent relationships.

A good friend of mine told me that the worst thing that two parties can do is to send their agreement to each of their lawyers and let them hammer out the details without being involved.  The result will be a ridiculous document and lots of legal fees. Any relationship requires some degree of risk that you’ll get screwed. If you are doing business with someone who you don’t trust, the legal document is not going to protect you.

Writing down contracts and making them legal adds incredible value.  Expectations are clarified, there is a written record that everyone can go back to, and there is assurance that everyone is protected by the law. Working together to have reasonable coverage in the event of a break down makes sense, but simulating the worst and trying to protect yourself from it, is likely just to destroy the work already invested in putting the original agreement together.

[Related Posts: Fences & Cages: Perspective In Contracts]






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