I was speaking to a client this morning about an agreement she had struck with a customer when she asked me, “What ever happened to ‘A man’s word is his bond?’” I replied that I am not sure that was ever true, at least not for all people at all times. The fact that we have a few hundred years of lawsuits (spanning back to Great Britain) for broken contracts implies that the problem of taking a person at his or her word has always been an issue.
Any time you make a sale or perform a service, there is at least a simple agreement. For example, if you sell apples, you offer to sell some number of apples at some price, and your customers accept that offer and pay you your price.
Many retail transactions are just that simple, but can become more complicated quickly. For example, what if your customer does not want the apples today, but will buy them in three days? Will you extend credit for that period of time, or do you demand payment up front? What happens if the orchard can’t supply you with apples on time, or what if the apples are spoiled? What if someone else offers you twice the price for the apples in the meantime – can you sell to that person instead?
If you do not have or use contracts in the regular course of your business, you might find it is time to re-visit that practice. It is not that people are more or less honest than in days prior. It is more that contracts are a proactive step to help all your transactions proceed smoothly, or at least to prepare everyone for the unexpected.
Uncertainty leads to unhappy customers, increased costs, and lost business. It is almost always cheaper to ensure that the terms of your agreement are clear up front, so that if calamity occurs, or a new opportunity arises, both you and your customers are clear on what to expect. Remember the adage: “A contract a day keeps the lawsuit away.” Or something like that…