Business in Washington | A Business Lawyer’s View | Why Draft Contracts and Business Documents?
As a Seattle based business lawyer who has also ran successful businesses for over 25 years, I know taking people for their word is a great practice. Many business ideas and relationships develop this way. That said, verbal agreements are hard to prove in times of dispute, especially a business dispute involving money. In a perfect and ideal business world there are never misunderstandings, facts are never misconstrued, and people never break their promises. Unfortunately, this is not the reality we live in.
As a businessman with over 25 years of business world experience, I want to trust my business partners but as a business lawyer I know it is best to get agreements in writing so there are no mis-understandings, or if there is, there is a plan to figure it out. Reducing ideas and agreements to a written agreement or contract is not bad business or a sign of distrust, it just a way of confirming the agreement and in some cases, working out what will happen if there is a problem. The way I see it, it is like a sport. It is not personal and I’m not a bad guy for wanting the rules of the game defined. Imagine playing a game with a lot of grey area rules. You could be arguing for days on what really went on in the game. Same is true in business.
What a well crafted business document does is spell out, define, sets guidelines, addresses liability, and anticipates issues and disputes that may occur. As a business lawyer, I have had clients come to me and say, “I bought these legal forms at the office store or online and it looks like it will protect me.” This is only partially true. Store bought or template legal forms are only general guidelines for what you may encounter. Thoroughly discussing and framing out your document with experienced business counsel will create a custom document to protect your specific needs. This does not need to be an expensive process.
It’s really not a good idea to leave a generalized and vague clause in a contract up to a judge or another party to construe and interpret the meaning. A custom tailored business document created by a knowledgeable business lawyer should eliminate generalities, vague clauses, and spell out terms.
What if you have a clause that says you are entitled to profits, but the document does not spell out how you calculate and arrive at the profit number? Is it gross or net? What does profits include? This could mean the difference of a few cents or a fortune. Washington State offers some guidance on resolving disputes by providing access to the Washington State Dispute Resolution Center but parties must agree to mediation and it is not always binding. Wouldn’t it be better to simply put in a document or contract that parties agree to use a specific mediator or binding mediation upfront? As a business lawyer who listens to business problems all the time, I cannot tell you how much grief this would save people if they did this in advance.
It is the best practice to prevent disputes from even arising by being precise in your agreement. In my opinion, the following tips can help you define your agreement in advance and with precision, whether you use a business lawyer or not.
– Spell out your terms.
– Be clear and definite.
– Set guidelines.
– What happens in a dispute? Mediation, arbitration, or court?
– Define who bears what costs and burdens, Does the losing party pay legal fees?
– Reduce your agreement to writing.
Washington State contract law prefers contracts to be in writing. This generally applies to business law documents.
An oral agreement may be partially enforced in Washington State, however, why would you fight to protect only part of your rights and not everything you are entitled to? The bottom line is if you are doing business in Washington State or anywhere for that matter, you can enter into an agreement by talking but you should confirm it in writing. As I have a background in business so unlike many lawyers, I understand the point is not necessarily to argue but to simply memorialize the deal and address any unspoken issues.
Final thought. Notarizing a document can give you piece of mind once the document has been finalized. Notarizing a document ensures proper execution, ensures that the agreement was entered into knowing and willingly, and deters fraud. Many Seattle area business lawyers are notaries or have notaries in their office. We have three of them. For more information on the notarization process, please visit the Washington State Department of Licensing.
Rhodes Legal Group is a Seattle area based law firm that handles business law matters and is staffed with lawyers who understand business and lawyers who understand litigation. For more information on Rhodes Legal Group’s business law practice group, contact Patrick W. Kwan, the business practice group head who has over 25 years of business world experience owning, managing, and operating businesses. Patrick understands and relates with business owners and provides insight and guidance in business and legal matters.