A Promise and a Handshake – Good. Now Put That in Writing.


A Promise and a Handshake – Good.  Now Put That in Writing.

A law professor once told me that a written contract is useless if people never breached their agreement.  In fact, the whole body of contract law would become obsolete if everyone simply kept their promises.  Why?  Because a written contract is only useful when someone breaks their promises and you have to find out what you can do to protect yourself.

That’s why when you read a contract document it has the basic who, what, when, where and a description of the thing or the service promised; but most of the text is concerned about what happens when someone breaks a contract.  There are notices that must be sent, opportunity to remedy the default, where to sue, who should pay the attorney’s fee, calculating damages, etc.  In short, the contract document sets out the rules of engagement that the parties have to follow when a promise is broken.

Which is why it is still amazing to me when I see someone walk through my door who says he just lent someone $10,000 in cash and he hasn’t been paid back.  I ask him was there any due date to pay back this money?  The client answers not really, but they agreed that the client should be paid when the other person sells a business, gets paid on a loan he is about to collect, or [insert excuse here].  Is there any proof that you paid them?  No, I just said I paid him in cash.  Are there any witnesses?  Not exactly, no one saw the client give money to this other person.  Okay, did this person ever acknowledge the debt he owed you to anyone?  Not publicly.  Then how do I even prove that you gave the money to this individual?  At this point the client looks at me puzzlingly, as if I said something that had an obvious answer but which he could not articulate at that moment.

And one or two things happen:  either the client gets indigent and says something has to be done no matter what the cost; or he looks at me with that lost expression as if not quite comprehending what just happened but realizing that he may never see that money again.  And it happens all the time:  this silly giving of money to someone on a vague promise of being paid back.

Now don’t get me wrong.  Not all promises have to be in writing and you can have oral promises that are enforceable in court.  However, the problem with oral promises are that unless it is something simple, you are going to have problem with proof.  Sometimes the facts of the case are so convoluted that you don’t know if the money lent was a gift, a loan, or an investment.

Call me cynical, but when you are giving something of value to someone (money, time, etc.) in the hope of being paid back, you should at least take the time to put that in writing, making sure that the other person understands those terms as well.  Otherwise, you should consider whatever you are doing in the name of charity and save yourself the agony of a long and perhaps a fruitless lawsuit.

So, you just entered into an agreement and shook hands on it – good.  Now go put that in writing.

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