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How Not to Get Burned in a Handshake Deal

It's simple: Don't do those kinds of deals. Here's how to get them in writing to avoid disagreements later.
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Agreements prevent disagreements. Sound trite? I don't think so. It’s amazing how many people don’t heed this advice--and then get burned.

I know I have. In my early business days, I had a handshake deal with a man I hired. He agreed that he would not seek other employment for two years. After a year, what he thought was a better offer came along, and he was gone. He said that he remembered that we had agreed on only one year. How could I prove he was wrong? I couldn’t.

Every now and then you will find yourself dealing with one of those slick types who says he doesn’t want a contract and “your word is good enough.” Maybe yours is, but his usually isn’t.

I always strive to come to an agreement and then put it in writing. Now when I make a deal with anyone, I send a letter the same day in which I:

  1. Thank the person profusely for their courtesy, and
  2. Spell out the terms of our agreement: “As I understand our agreement, I have agreed to do this... and you have agreed to do that...”

This minimizes any confusion. I don’t usually ask for any acknowledgement other than to make sure they received the letter. It’s just a nice, friendly, little reminder--and a useful record if there should be any misunderstandings later. You’d be amazed at how helpful this little exercise is. Pale ink is better than the most retentive memory. 

One more piece of advice: If the terms are important enough, make sure your agreement has some legal standing. Sometimes disagreements can’t be settled amicably or easily, even with a written document. A good lawyer will make sure you are protected.  

In a litigation-happy society, clear agreements often prevent small disagreements from becoming big ones.  Unless you have time and money for an extended lawsuit, take the time up front to spell out the details. Your lawyer can anticipate scenarios that perhaps you haven’t considered. 

One last word of caution: Always make sure you know who you are doing business with. You can save yourself plenty of headaches by using your head from the outset.

Mackay’s Moral:  A solid agreement keeps a meeting of the minds from becoming a clash of wills.

Last updated: Aug 23, 2012

HARVEY MACKAY | Columnist | Founder, MackayMitchell Envelope Co.

Harvey Mackay, author of The Mackay MBA of Selling in the Real World, is founder of the MackayMitchell Envelope Co. He has written six bestsellers, including Swim with the Sharks Without Being Eaten Alive.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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