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Law Offices of Jonathan M. Cooper

Three Mistakes to Avoid When Negotiating a Small Business Deal

Although the potential pratfalls and pitfalls in negotiating a small business deal could fill a large warehouse, here are 3 common – and easily avoidable – mistakes that I’ve seen these businesses make:

 

  1. Doing Business on a “Handshake” - The handshake deal has its origins several hundred years ago, where each side was making certain that their adversary was unarmed. Ironically, the more things change, the more they stay the same: If the other side to the potential deal insists on a “handshake deal,” because “this is the way we’ve always done business,” and refuses to have a fair agreement put down in writing, you should not hesitate to walk away from the deal or this partnership. Stated plainly, it is both unfair and unreasonable for ANYONE to ask you to risk the financial security of your business, your employees or your family based upon a stranger’s word. On second thought, it is not unreasonable: it’s nuts.In addition, even though the courts are increasingly recognizing as valid various unsigned electronic documents, oral (i.e., unwritten) agreements are still neither valid nor binding in many instances.  As a result, it should come as no surprise that if a dispute between the two parties arises later on about the other side’s performance (or failure to perform) under the agreement (which is certainly far from unheard of), and you don’t have a signed agreement, you may very well be left without any legal recourse. Simply put, there is no excuse for failing to make sure that you have a properly executed written agreement.
  2. Forgetting That Silence Does Not Equal Assent - Like the other two items on this list, this sin should be obvious. You cannot have an agreement unless each side to the deal clearly understands what its responsibilities and obligations are under the terms of the proposed contract.
  3. A Hastily – and Cheaply - Drafted Agreement Will Likely Cost You Both Time and Money (in the words of my wife’s grandfather, “Cheap is Dear”) - Even though hiring a small business attorney to draft a meticulously detailed contract may prove somewhat tedious, and may prove more expensive in the immediate term, the specificity of each party’s duties under the agreement will benefit your company by enhancing your asset protection and reducing your company’s potential liabilities. Moreover, it will lessen, if not eradicate, potential misunderstandings between each side to the agreement, and thereby, help avoid far more costly commercial litigation.

Jonathan Cooper
Non-Compete, Trade Secret and School Negligence Lawyer