Only fools rush in. We’ve all heard that expression many times and probably think we’re far too wise and experienced to be such a fool. However, you’d be amazed at how often businesses and individuals rush headlong into business relationships or contracts only to find out they should have used more discretion, patience and judgment. Remember, before you date someone, you usually want to know at least a little bit about them; before you go steady, you want to know a little more; and before you get married, you really want to know them well.
Consider applying some of these dating lessons and clichés to your business and legal relationships and contracts, and you may find you have fewer emotional breakups or (more importantly) fewer bad marriages that end in messy divorces:
Ask around (a/k/a, do your due diligence) – learn all you can about a person or company before you engage them, become partners or enter into a long term binding contract.
Trust your instincts (a/k/a, if it doesn’t feel right, don’t do it) – unless there’s some compelling reason you have to work with a specific person or company or you have to jump into a deal with both feet, if you’re getting a bad vibe, don’t proceed.
Go slowly (a/k/a, – start small) – whenever possible, start with a smaller project or a short term relationship and see how it goes. There’s usually time and there will almost always be more opportunities to work together if the first one goes well.
Build in an escape hatch (a/k/a, don’t put all of your eggs in one basket) – even if you’re ready to hire someone or enter into a contract, make sure you have the ability to terminate or get out of the relationship.
See other people (a/k/a, avoid exclusivity) – exclusive relationships are serious commitments and have high risk (and potentially, high reward); take your time.
There are more fish in the sea (a/k/a, know when to say when) – ending a bad relationship is always hard – whether personal or business – but when your gut tells you it’s not right, then it probably isn’t. Cut your losses and end the relationship (in the right way, of course).
The bottom line is, business and legal relationships resemble personal relationships – with the same types of risks and rewards. Look before you leap.
Have you ever had wills drafted or met with your financial advisor or insurance agent, and at the end of the meeting, he or she said, “Now we need to revisit this every couple of year to make sure things haven’t changed.”? That same approach should be followed in your other legal and business relationships.
Relationships and circumstances can change for a variety of reasons. The law changes. One party is faced with financial or other business hardships. One party transforms from a start-up business that is just happy to have a contract to an industry powerhouse. An employee right out of school becomes a partner in the business. Territorial capabilities or needs change. Etc. When these changes happen, it is critically important that the parties’ contract(s) be reviewed, and where appropriate, revised. Otherwise, that ever-important “meeting of the minds” that we attorneys talk about may no longer exist – and that’s a recipe for trouble.
As I’ve said before, in negotiating and drafting agreements, we should attempt to anticipate the various ways that the parties’ relationship may change over time, and where possible, include provisions that allow the contract to evolve as well. However, it’s rarely possible to anticipate all of the changes that may occur. For that reason, I recommend a periodic revisit of your contracts. The old saying, “If it’s not broken, don’t fix it,” is absolutely true; but your contracts may be broken now simply because they don’t fit your evolving business relationship. Don’t let that be the case – remember the other saying, “An ounce of prevention is worth a pound of cure.” Review your contracts and relationships periodically as part of your preventive maintenance.
There’s a principle, or really two related principles in the law known as good faith and fair dealing. There are various definitions, but generally the combined concept means something like, honesty in fact and the observance of reasonable commercial standards of fairness. I’d like to weigh in on the importance and value of good faith and fair dealing – not just in purely legal terms, but in all business activities including legal and contractual relationships, negotiations, and even litigation and dispute resolution.
The concepts of good faith and fair dealing have legal meaning and impact. The UCC implies them in contractual relations between merchants. Franchise law implies them in the relationship between franchisor and franchisee. Courts sometimes find a failure by a party to act in good faith or to deal fairly and reasonably with another party as a basis for a breach of contract or tort claim, or as the basis for a defense to such a claim.
However, and I think equally important, good faith and fair dealing have direct value and benefit to the underlying businesses and business activities. They lead to honest and efficient/effective negotiations. They lead to clear and understandable contracts that reflect the parties’ actual agreement and intent, rather than hidden agendas and attempts to “trick” the other party. They allow the parties to avoid misunderstandings and to resolve them more directly and efficiently when they do arise. In other words, they save time and money and allow the parties to focus on the important business issues rather than protecting themselves from the other party’s devious behavior.
Good faith and fair dealing is, in some ways like the law’s version of the “Golden Rule” – do unto others as you would have them do to you (and the world will be a better place). Treat others with honesty and fairness, and it will yield value to you and to them – value that directly impacts your bottom line.