by John E. Taylor
Some clients, especially if they’ve been around a while, occasionally decry the current lack of “hand-shake” deals: “There was a time when we didn’t need to spend all this time on contracts–-much less lawyers. We just shook hands on the deal and moved on. We trusted each other.”
Even if this approach may have been acceptable at one time - and I question even that - it is not now; and it’s not just a question of trust. It’s a matter of recognizing, for one thing, that stuff happens.
Even an agreement between long-time friends may be based at least in part upon certain assumptions and contingencies on one side or the other, spoken or unspoken. If, due to an unforeseen occurrence, or a faulty assumption, doing the deal will render one friend insolvent, should the other require him to follow through? A deal gone bad between friends, despite the good faith of both, can destroy the relationship.
Memories also change, even between friends. Relatively simple transactions include several terms. The parties’ contract may require, for example, agreement upon price, interest rate, timing, financing, value and appraisals, required approvals and other conditions. Remembering all these considerations is difficult, if not impossible, if not written down. And what if, for example, one of the parties dies? Should the heirs just take the word of the other as to the deal terms? According to the “statute of frauds,” the Georgia version of which is in Section 13-5-30 of the Official Code of Georgia Annotated, a contract concerning land, to be binding, must be in writing and signed by the party against whom it is enforced. An agreement regarding real estate, therefore, should be in writing for practical reasons and generally must be in writing for legal reasons.
In short, putting a deal in writing does not indicate a lack of trust. Instead, it is a means of creating, building and preserving relationships. An agreement well considered and drafted will express the expectations of both parties and specify all the important terms, thereby enhancing trust instead of gutting it. Of course, no amount of paper will assure that an untrustworthy party will perform as agreed. In fact, I tell clients not to rely upon a written contract as a substitute for trust; but, especially if there’s enough money involved, clients usually take the risk.
Granted, negotiation of a contract may itself be contentious and challenging to relationship. All too often and easily, parties and their counsel give rein to their egos and contract negotiations become “win or lose”, or worse, “scorched earth” propositions. “Win-win” should be the goal. All parties’ believing that they have been fairly and honestly heard and that the final deal is a reasonable and fair integration of their respective needs and perspectives enhances relationship and empowers the negotiation process itself to become a trust-building exercise.
Lawyers therefore have the opportunity to serve as relationship midwives; but clients must first retain them, and, except in appropriate pro bono matters, pay the fees. Some parties eschew engaging attorneys because they don’t want to pay, or they feel that attorneys just hinder the deal. Admittedly, some attorneys (as well as their clients) make deals more difficult—and therefore more expensive– than they need to be. Most attorneys (believe it or not), though, want to represent their clients conscientiously for a reasonable fee.
In my experience when people speak of a lawyer’s being a hindrance, they mean that the attorney unnecessarily delays or complicates matters. Again, that can and does happen. If, however, a deal is somewhat delayed to make sure everyone is on the same page and that everything is adequately considered and documented, or if inclusion of all the requisite deal points render the agreement longer than the client thinks it should be, then some client education may be appropriate. Legal fees incurred to structure and document correctly up front will likely be substantially less that those incurred if the foundation is not well constructed and the deal goes bad. Look at it as an investment in relationship.
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