Uber VC and all around sage Fred Wilson proclaimed in his fantastic blog that he often wishes that he we could do business on a handshake. He goes on with this story:
I always like to imagine the way that Andy Bechtolsheim handed Larry and Sergey that check for $100,000. I have no idea how it went down, but I always imagine they that pitched him, he said “sounds great” and whipped out his check book and wrote a check for $100,000. I sure hope that is how it happened. If instead he said “I will get my lawyers to draft a purchase agreement” I will be really bummed out.
The biggest problem with doing business on a handshake is you may not be dealing with the same folks in a few years. And when the person you are dealing with changes, things change. In those situations, you have to have a written agreement to fall back on. And it will be too late to get that document in place when the circumstances change.
So the right thing to do is get it in writing before you part with your cash. That is how I have always done it and how I suspect I will always do it.
So on Monday I am going to trial on a case just like Fred Wilson imagined where a check was whipped out and there was no written agreement between the parties. As you can imagine, it turned out to be a bad idea.
The case started in 2010 and we are finally going to trial in 2013. The parties disagree about the basic essence of their relationship. The suit could have been avoided if they had a written contract. As lawyers, my adversary and I are making money while the clients are out of pocket for thousands of dollars. Don’t let them be you.
Before you decide to enter into a business relationship make sure you trust your business associates and remember to enter into a written contract.
The Law Office of Frederic R. Abramson represents business and individuals in New York. Feel free to contact me at 212-233-0666.