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Tuesday, August 30, 2011

A handshake away from litigation

There is something noble and virtuous about the handshake.  Despite all its righteous might and morality, the handshake is a business person’s worst nightmare.  Handshake deals are a litigator’s dream.  Too many sound business professionals live by the practice of consummating deals with nothing more than a handshake.  While many contracts do not have to be in writing to be valid, the practice of putting it in writing saves dollars and sleepless nights over a business deal gone bad.  

In its simplest form a contract is nothing more than an exchange of promises.  You promise to fix my car and I promise to pay you = contract.  Living up to a contract is easy until something bad or unexpected happens. If there is nothing in writing, both sides are left to their own devices to quarrel about what the deal really is.  A common saying in the legal profession is, “Your client says one thing, my client says another, and the truth is somewhere in the middle.”  This is true, not because people intentionally lie, but because people have a natural tendency to remember things the way that suits them best (unless I’m in a disagreement with my wife in which case I have learned over the years to remember things in a manner consistent with her recollection).  

Take Lincoln and Abe, for example.  Abe needs a tractor.  Lincoln has a tractor.  Lincoln tells Abe, “Pay me $1,000 for use of the tractor during the farm season and you can pay me an additional $9,000 for the tractor after the harvest.”  Abe tells Lincoln, “You’ve got a deal”.  They then, of course, shake on it.  Abe knows he has just leased the tractor with an option to buy after harvest.  Lincoln knows he just sold a tractor to Abe for $10,000.  During the farm season the tractor is struck by lighting and vaporized (or other calamity).  After harvest, Lincoln goes to his lawyer, Tommy Tort, and sues Abe for $9,000.   Abe goes to his lawyer, Seedy Sal, raising the lease with option to buy defense.  Tommy Tort and Seedy Sal then duke it out in court the next 18 months generating attorney fees well in excess of the $9,000 in dispute.  The whole situation could have been avoided by putting the deal in writing.

The more you loathe lawyers the more you should seek them out on the front end of a deal so you do not end up paying them more on the back end.  While a lawyer cannot foresee every scenario (except for Tommy Tort – that guy’s amazing), a competent lawyer can put you into a much better position to manage the uncertainties of a deal.  By putting it in writing first and then shaking on it you maintain the honor of the handshake and the certainty of what you are actually agreeing to.  If not, I hear Seedy Sal is taking on new clients.

Jeff Brunson is an attorney and shareholder at Beard St. Clair Gaffney PA.  Jeff is a trial lawyer who specializes in business disputes and estate litigation.  He can be reached at his Rexburg office (208) 359-5883 or jeff@beardstclair.com
Staff at 2:54 PM
Litigation
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