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The It’s-Who-Signs Problem

Andrew Weltchek, http://weltcheklaw.com/, explains contracts

A contract is a script for a relationship that exists over time and requires performance by both parties. A strong contract will aim to protect you and clarify, for both parties:

  1. What their responsibilities are;
  2. What constitutes a breach; and
  3. How disagreements are to be solved.

All of that is a necessary but not sufficient condition for performance under a contract. Its terms are important, but equally, if not more important, is the reliability of the parties themselves.

The strongest contract can’t keep you out of court if the other party is determined to break its promise. Sometimes the justice of your cause and the careful language you put in the contract are less important than your bargaining power.

For instance, if the other side has more money and more determination – or is simply more reckless than you – you may find yourself in court no matter what your contract says. A friend of mine once said to me that the single most important thing in any contract is who signs it. If the person is trustworthy, then you can rely on his or her performance. If the person is not, then all the contract language in the world won’t save you from aggravation and expense.

Ideally, we would all do business with people who need us no less than we need them. Not everyone has that luxury, though, in which case it becomes necessary to balance how much is at risk if you go into a contract with a party who has less at stake than you do and can, in effect, afford to stiff you. Every young business has to enter into those kinds of agreements, and nobody can avoid them entirely. You just have to be realistic about what that risk is. Will you gain some service, technology, experience or other benefit?

A well-written contract is by no means a waste of time. It’s just that the person who signs it makes more difference than anything else.

Who is signing your contracts?

Andrew Weltchek
Weltchek Law

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