Watch Your Back

I’m much too young to remember this, but there was a time when a man’s word was as good as done. A handshake was worth more than a contract written by a team of top lawyers. This was mentioned in the play Jersey Boys when Frankie Valli and Bob Gaudio seal a deal with a handshake, and it was enough for both of them to trust.

Sadly, for many people, those days are gone. While not everyone is lying consistently through their teeth, that honor to keep a promise is much rarer today than before. Undesirable contracts can be fought to be avoided. Deals can be written off because a verbal promise was conveniently forgotten. In fact, many contracts clearly state that all verbal agreements are null and void as relating to the content of the contract.

However, to get around in the world, one must still have an element of trust. Even where the law might help you, it is often insufficient to implement. For example, a bad debt can be collected, and for small amounts, you can go to small claims court. But the cost in terms of time might be more than the debt itself, and so you would have to write it off. You, however, trust your clients to some extent to pay their bills, even if from a practical point of view you could not force them to.

For that reason, many contractors require deposits, installments, final payment on delivery. All of these are ways to protect yourself as much as possible from not being paid. However, they do not fully accomplish that task.

Take, for example, a company hired to do some work. They can create whatever payment structure they want, but if they don’t formally arrange for changes to the scope of work, they can end up doing work with no way of collecting. If the project takes 50% more time than originally planned because of changes to the requirements, but the only agreement to pay for those changes was verbal, there may be no way to recoup that cost.

For this reason, anyone running a business needs to learn the lesson to always watch your back.

Any deal, or arrangement, needs to be in writing. It needs to be acknowledged by all parties. It needs to be enforceable, though even an informal email can often suffice.

Most of all, it needs to make clear the rights and expectations of all parties. It is not safe to assume that verbal agreements will be honored, and it only takes one occurrence of someone violating such an agreement for someone to understand why.

But why should you have to learn the hard way, when it’s so straight-forward to simply protect yourself in the first place?