Volume 8 Issue 4 -- July/August 2004
Volume 8 Issue 4 -- July/August 2004
ďIím sure we all
agree upon, and will remember, the important elements of this meeting and our
understanding; therefore, there is no need to put pen to paper.Ē
Surprisingly, there are
people who have enough faith in the future to believe that an understanding,
like the oral one above, will be carried through indefinitely and that the
memories of those participating in the meeting will not fail or falter.
The contrary view,
humorously stated, is ďOral
agreements are not worth the paper theyíre written on.Ē
It is unrealistic to believe that memories will remain intact and that parties will continue to get along forever. They donít and they wonít. Memories fade, and people donít always agree about what happens in the future, particularly after the passage of significant periods of time.
Written agreements are
essential when parties disagree. If
circumstances never changed and if all ventures succeeded, then probably there
would be little need for written agreements.
However things do
change; situations do go bad; and unexpected problems do arise.
Itís the bumps in the road that create the trouble -
the divorce or death of an associate, expansion of a business and
bringing in new employees who donít see things the way the principals do, the
faltering marriage of an adult child who is an owner of the business, and on and
on. A list of possible contingencies
could go on forever, but it suffices to say that we all know that things can
happen that will adversely affect business relationships.
A written agreement
does not prevent bad or unexpected things from happening, but one of the
benefits of having a written agreement is the ability to state in advance and
agree upon what would happen if, for example, a business associate died or what
would happen if a part owner wants to leave the business and how he or she
should be paid for his or her interest.
Another reason for
considering written agreements is the diversity of people and cultures which
Because of this
diversity, having business agreements in writing has been perhaps more important
in this country than in countries such as Japan
where there is greater
homogeneity of population and thought.
Often the value of
written agreements lies not so much in what they say but also in the process of
getting to the point of writing. Thinking about what should be in the written
agreement and how certain foreseeable problems or changes should be handled is
often more valuable than the actual words chosen for the agreement.
One way to guide this process is through the use of checklists.
In our law firm,
Newland & Associates, we make extensive use of checklists that outline
common problems or common issues that arise in typical situations.
The completion of the
checklist is, in many instances, more important than the document produced from
the checklist. It is the interchange
between the participants in the transaction addressing various problems and
leading up to the final conclusion, that is often more valuable than the
When preparing a
written agreement, it is common sometimes for a new or inexperienced attorney
and a lay person to take an existing agreement, simply change the names of the
participants, and assume the job is done. Far
from it. Taking an existing document
and not reviewing the range of likely issues and available choices can be quite
As a practicing
attorney, I can say there is no need for a written agreement so long as the
participants can give their absolute assurances that there is never going to be
a problem in the future. Until the
world reaches that stage of perfection and certainty, it is essential that you
get it in writing.
Does an agreement have
to be written by an attorney? No,
but the well informed process of considering what should be in the agreement,
guided by a checklist or practical experience, is essential.
If you need help with planning and/or drafting an agreement, give Newland & Associates a call.
Published by the law firm of Newland & Associates, PLC
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Call us at (703) 330-0000 for a full range of business law and tax-related services.
While designed to be accurate, this publication is not intended to constitute the rendering of legal, accounting, or other professional services or to serve as a substitute for such services.
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