A lot of the dispute-causing mistakes that business owners make have to do with drafting contracts, and missteps in the drafting process.
As an example, I’ll tell you a true story about something I encountered just yesterday in my practice. A client came in with a contract issue. His company performs very expensive jobs for their customers. It came time to sign the contract, which was a standard boilerplate contract that someone had written up for his company around ten years ago. The customer had a lawyer with them, and the lawyer made few changes to the contract and gave it back to my client, who looked it over and then signed off on it.
My client then came to me asking me to take a look at the contract and the extra clauses his customer’s attorney had added. The clauses were rather extreme. For instance, one said that if my client didn’t finish the job, not only did he not get paid, but he had to pay the customer the difference if the customer had to pay someone else more than they were going to pay my client to finish the job. It basically required my client to double-count damages by taking a loss on payment and then picking up the tab for whatever it costs to finish the project. Unfortunately, my client had already signed off on this clause, so there was limited recourse.
People doing business expect everything to go a particular way, according to plan. They don’t tend to think about what will happen if things don’t work out or a conflict arises. That was certainly the case for my client in the example above.
If everything goes according to plan, he will likely be just fine. He can do the work he agreed to do, everyone will be happy, and he will get paid. However, if any conflicts or issues get in the way of completing the project, he could be on the hook for lost income and a lot of additional money.
In business, you just never know what’s going to go wrong, and you have to think about those things before entering into a deal. Specifically, you have to write your contract in a way that anticipates and accounts for all possibilities—both good and bad.
Another thing that tends to cause conflict in business has to do with business partnership relationships, or—as I sometimes call them—business marriages. When people go into business together, lots of things can happen to their relationship. It can stay exactly the same, which is ideal if they get along. It can also deteriorate and lead to a falling out. It might even stay the same and become abruptly disrupted by a crisis—say, if one partner has a heart attack and wants/needs to suddenly retire, or someone dies.
I’ve handled these “business marriages,” and I’ve handled business divorces, so to speak. I have also helped clients to create contracts that account for a potential change or disintegration of the relationship between the business partners. There are special contracts – “business prenups,” you could call them – that can make the whole process much easier for everyone involved.
I Have A Small Business With A Partner. We Have Significantly Expanded And Begun Fighting. Should We Consult An Attorney Now?
Absolutely, yes. The earlier we address any burgeoning issues between the two of you, the better. My hope as a business attorney is that clients come to see me before their relationship issue or conflict has reached the point of no return, or the point where they can’t or won’t back down from suing one another.
Can I Sue For Breach Of Oral Contract?
Yes, you can sue for a breach of an oral contract, which is a contract where there is nothing in writing. Of course, the results of such a suit will vary far more in suing over a breach of oral contract versus suing over a breach of a written contract. There is a reason that we like to put contracts in writing. Every person has a different version of events and the facts, and you never want to be in a he-said-she-said situation where it’s your word against the other person’s word. Under the law, oral contracts are theoretically just as enforceable as written contracts. They’re simply harder to prove.
This matter came up in one of my first cases, years and years ago. A guy from another country loaned almost $100,000 to somebody down here in Wisconsin, and he never got anything in writing from the borrower. I started that case all those years ago and I just settled it last year. That was the single biggest soap opera case that I’ve ever had. Ultimately, though, the oral contract was enforceable, and we ended up collecting the entire principal and a lot of interest, but it took an unreal amount of time and effort.
People make oral contracts all the time. When it comes to contractors in particular, many deals are still sealed with a handshake, without backing up that deal in writing. And while that might work if everything goes according to plan, it can become disastrous if anything goes wrong.
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