THE ONE THING YOU ABSOLUTELY, POSITIVELY DON’T WANT TO DO WHEN YOU BEGIN A BUSINESS VENTURE WITH SOMEONE
By Richard Amada, Esq.
Okay, let’s say you and your pal Mike decide to do a little business venture together. You’ve written this charming little children’s story about throw pillows that come to life and teach a little girl a valuable lesson about the importance of not using throw pillows as projectiles with which to pummel her little brother. And you’ve asked Mike, always the artsy one in the crowd, to draw some illustrations to go with the text. You tell Mike that, if the book gets printed, you’ll give him twenty-five percent of whatever you make. Mike agrees and draws a handful of sketches for you to include when you shop it around to publishers. The two of you don’t bother with anything like a formal contract. After all, you and Mike are best pals. And signing a contract would be like saying you don’t trust each other. Hey, c’mon! We’re talkin’ about good ol’ Mike, here! How could you let Mike think you don’t trust him?!
Well, lo and behold, a publisher snatches up the rights and publishes the book. You get your check and you give Mike his twenty-five percent, just like you said you would. Everyone’s happy. Ain’t life grand.
Then a few months pass, and you get a phone call from the publisher who’s going to do an audiotape version of the book. “Great!” you think to yourself. “Another check for me!”
“Great!” says Mike when you tell him about the audiotape that’s coming out. “Another check for me!”
“But, um...” you stammer with embarrassment, “it’s an audiotape, Mike. They won’t be using any of your drawings.”
“So what?” reasons Mike. “You said I get twenty-five percent of whatever you make on it.”
“That was twenty-five percent of whatever I make if the book gets printed,” you quickly add. “This isn’t a printing. It’s a tape.”
“So?”
“So your drawings don’t have anything to do with it."
“Whaddaya talking about?! My drawings are what made the book a hit with the kids! Everyone said so!”
“So?!”
“So, if it weren’t for my drawings, they never even would have published it! And they sure wouldn’t be turning it into an audiotape! You owe me!”
“So, if they publish the book in Braille, you’d still expect me to pay you for what isn’t even being used?!”
“You better or else...!”
Well, you can see where this is going. It all started so good. Everyone was a pal...until the money started coming in. That’s when pals with the best intentions find out the hard way that their verbal agreement, as the old quip goes, isn’t worth the paper it’s printed on. In the above example, no one is really clear on what they agreed to. And, at this point, even if it all gets worked out in the end, there’s a serious danger that the friendship with good ol’ Mike will never be same again. The trust that once existed between friends has been damaged.
So, the moral of the story...The one thing you absolutely, positively don’t want to do when you begin a business venture with someone is undertake it without first having everyone sign a written contract. And, if you, yourself, aren’t savvy about drafting such agreements, by all means talk with someone who is. There are just too many hidden pitfalls out there. And they can lead to a falling out among friends or even costly litigation. And nobody wants that.
The reason a lot of people don’t bother with a formal contract when undertaking business ventures with friends or family is exactly the reason alluded to above. You don’t want to give friends or family members the impression you don’t trust them. Well, before you dismiss contracts as mere tools of the distrustful, stop and think about what a contract truly symbolizes. Ask yourself this question: Would you do business with someone you don’t trust? The obvious answer is, of course not. We would never willingly engage in a business venture with someone we don’t trust. We only do business with people we believe will live up to their end of the bargain.
A written contract, therefore, should be viewed as your way of saying to the other person “I trust you enough to want to do business with you; I fully trust that you’ll do everything you’ve said you’ll do; and, in return, I’m willing to put my name on a document that says what you can expect for putting your trust in me.” In essence, each person who signs a contract is telling the others involved what he or she pledges to do in return for the trust that they have shown in him or her.
Pledging good faith in those you do business with, and ensuring them their trust is well placed with you, is a good thing for everyone.
© 2008 Richard Amada.