Imagine you’re waiting at a coffee shop for someone. You check the time and they’re already an hour late. How do you deal with it? Would your answer be different for a business associate versus a first date versus a grandparent?
If you’re like most people, how you respond will differ depending on who you’re dealing with. The same holds true in negotiations. One’s anticipated outcomes in terms of both relationship and the substantive matter need to be considered.
This is also true in considering whether you ought to get your negotiated deals in writing or not. Most people advise ‘always get the deal in writing’. Movie producer, Sam Goldwyn is attributed with the famous quip “A verbal contract isn’t worth the paper it’s written on”. Lawyers in particular typically advocate to get written contracts. Many people believe a contract is only valid or enforceable if it’s in writing. Let me bust that myth. Contracts can be written, verbal or inferred by conduct (with limited statutory exceptions). The question is which best serves you in any given situation.
Today I aim to demystify this issue. And don’t worry, I won’t throw a lot of legalese at you. In fact, as a longtime attorney myself I’m embarrassed to admit that many contracts fall apart once lawyers get involved. With all the best intentions, lawyers’ natural inclination to protect the client at all costs typically leads to a lot of crossing t’s and dotting i’s for potential eventualities that are unlikely to ever come to pass. It’s the required cynicism of the profession to consider all possible negative consequences that may arise so as to protect against them for the client. This can often lead to heightened anxiety of the negotiating parties and raise fear of the unknown which can cause deals to fall apart over issues that weren’t necessarily on the table.
Like most people since March of 2020, I confess I’ve periodically binged on Netflix, including a lot of shows with courtroom scenes. In those scenes you often see the quintessential “as per section abc of [Document] it is the [Plaintiff/Respondent] position that xyz”. Usually these written documents/contracts helped the judge/jury decide the outcome in a given case.
Maybe you thought that was just entertainment, but as a lawyer for over 30 years I know the importance of these scenarios, not just in the courtroom but in everyday business.
Let me share a recent personal example where we didn’t get the negotiated deal in writing and it backfired. While in Mexico for a business conference, I realized that because my roommate booked the room (and was leaving a night early) I didn’t have a room for my last night. I called my assistant to book me the extra night under the preferred conference rate. And (as often happens in dealing with business in Mexico) after much haggling (that no rooms were available, that my current room wasn’t available, that the preferred rate wasn’t available … you get the idea) she finally secured the room at the preferred rate, assuring it was a simple extension of one night and I’d be able to stay in the same room without any hassle.
Sounds great, right? Wrong. Because my assistant didn’t get her conversation in writing, they locked me out of my room a day early and I had to expend considerable time and energy sorting the issue out (going through the same arguments: that the room wasn’t available, the preferred rate wasn’t available, etc). While I negotiated a better deal, in the meantime I couldn’t access my clothes or materials for the conference. Needless to say, it was inconvenient.
The lesson that can be learned from that example is that if you negotiate preferred terms or conditions or perks or benefits (whether with a service provider, supplier, or otherwise) it’s a good idea to get them in writing so there’s no ambiguity or wiggle room for the other side to back away from honoring the commitment. I’m sure you can think of a few examples where promises or representations were made by a salesperson or provider that weren’t honored. At a minimum, it’s good practice to take notes yourself of assurances you receive, including the name of the person, the date, time and substance of the promise(s) made.
While verbal agreements are legally binding, there is the issue of proof. A written agreement (if done properly) reflects the commitments of both parties. With verbal agreements, the problem of ‘he said/she said’ can arise and the matter may turn on credibility.
Other risks to verbal agreements include the fact that:
- people’s memories are imperfect;
- misunderstandings can occur where there’s not a shared understanding about the agreement;
- one (or more) party may be dishonest; and/or
- the person with whom the deal was struck may leave the organization and someone else is left to implement the deal.
There is a difference between a formal contract and other written agreements or acknowledgements. Again, both can be enforceable, but a formal contract should typically have the following elements:
- Identify the parties to the agreement
- Identify the subject matter
- Identify the terms and conditions
- Set out the consideration (what is being given in exchange for whatever is being received/offered)
- Signature of the parties
Having said that, sometimes a simple expression of intention in writing can suffice. i.e. going back to my example, a simple one-liner email from the hotel to my assistant stating ‘This confirms the one night extension of the room for Cindy Watson from [Date] departing [Date] at the rate of [agreed upon price].’
Here are a few additional tips for looking at your written agreement or contract:
- Make sure it is clear.
- If there is anything you don’t understand go back to the other party and ask for a clarification. This won’t make you look dimwitted but could potentially help clear up a misunderstanding.
- Watch the language of the contract. In negotiations, words matter, especially when they are on paper. You don’t want to get a negotiation in writing only to find it goes against what you were originally trying to argue.
Now let’s consider when it may not make sense or be necessary to get agreements in writing. As noted at the outset, you’ll need to consider both the substantive outcome you seek and also the relationship outcome you seek. Sometimes taking someone at their word can build trust in a relationship and strengthen bonds. Insisting on getting assurances in writing may cause offence and not be worth the cost in terms of relationship.
Further, sometimes people or providers are able to exercise discretion and latitude in offering outside or beyond the formal parameters. However, insisting on getting those commitments in writing might dampen the enthusiasm or ability to do so.
Let’s talk about the elephant in the room … those tricky negotiations dealing with family and friends. You would think these would be easier negotiations to navigate because you already have a pre-existing relationship with them. But negotiations with those closest to you are often the hardest because of the past and ongoing relationship. Asking for an agreement in writing could cause a rift in what may be a strong dynamic. And yet, in many family dynamics, getting compliance from a family member may be infinitely harder than from arm’s length business partners.
As always, being intentional about your decision whether to get an agreement in writing or not is key. There is not necessarily a right or wrong answer in any given situation. So long as you consider the elements discussed here, including the pros and cons of each approach, you’ll be ahead of the pack. Most people act (or not) out of habit or reflex without bringing intention to the decision-making process.
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