Lots of small businesses forego counsel at their peril – not always because of conscious choice, but frequently out of naïveté. Owners and managers of businesses of all stripes often overestimate their personal talents in contracting by conflating their strong skills in negotiation and fostering business relationships, which they are often strong at, with strength in contract drafting – the process of reducing an agreement to an enforceable writing. One “cardinal rule” of negotiation is don’t give your number first, that way you make the other side set the ceiling on the negotiations. However, a cardinal rule in contract making is the drafter starts at a position of dominance – there is a first strike advantage.
If you start the contract drafting process, you can begin the day with everything you ever wanted in the contract – any modification represents a concession the other party must win either by trade or compromise. Without a lawyer’s help, however, it may be daunting to propose a supply agreement, a lease, a vendor agreement, a purchase order, nondisclosure agreement…or any of the other litany of contracts that we see every day.
The benefit of a lawyer in getting you some templates to work from, as well as reviewing, redrafting, and advising on contracts in your business is a critical business need. How often do you start from the position of disadvantage and start the negotiation trying to win concessions off of the other party’s form? How often do you hear “this is our form contract – we can’t make changes.” Well if you could start from that power position why aren’t you doing it?
I hear business owners say they are frugal, they think the costs of a lawyer are too high, for the price they can do pretty well themselves and similar costs-based excuses. But the hundred or two hundred dollars you saved by not having a lawyer review and help you on a contract might cost you thousands or tens of thousands if there is a problem where that contract needs to be enforced. How often do houses burn down? Not that often, but if you are shelling out hundreds of thousands of dollars you want that investment to be protected. Similarly, if you are shipping out your inventory, but haven’t protected yourself against a purchaser’s default aren’t you basically inviting the house to be set alight? What happens if that indemnification clause gets triggered – did you carefully review what was and was not included in your obligations to the other party? Are you going to end up paying for their negligence?
It is time to offload some of the responsibility for reviewing contracts and bringing on an experienced legal team to help guide you and put you at a strategic advantage with your business peers. For relatively little cost you can get some form contracts ready for future use, or have the contract already in play reviewed and tweaked to make it more mutual and fair to all involved, if not to your advantage.