Verbal understandings are not contracts


coppersIn my business I think it is important to have agreements in writing with my clients so that they know exactly what I will be doing for them in conducting their affairs (and what I will not be doing). I have always said that verbal agreements are no use especially when the parties fall out or one side has a perceived issue.

Many of us look after family members or agree financial arrangements with them, and somehow it seems less comfortable to ask them to enter into a written agreement. Yet why should they be any different? They are people who may have ideas you have not fathomed.

So I confess. My wife and I entered into a financial and verbal understanding with a family member ten years ago, and when it came to the crunch last year, he reneged on the agreement. That has cost us a lot of money. That is the point: where money is involved, people may have an eye for the main chance when greed, and other motives unknown us, kick in.

If you are relying on a family member to repay you or at some stage meet certain financial obligations, have it all in writing no matter how uncomfortable it makes you feel. That is an insurance we all need.

As for us, we have again learned from experience. Trust no one where money is concerned, and get it in writing when you need to. Onwards and upwards!


Verbal contracts and honour

Artist contract XYNN (excerpt)
Image via Wikipedia

In terms of gathering in new clients, I cannot call myself a hard-nosed salesman, but I do sell on the value of my business offerings. Generally my approach is soft-selling, letting the prospect lead herself to make the decision. I generally think of my “close” rate at better than 90%, but of course that is not boasting. All my prospects have already qualified themselves by finding me through on-line and old-fashioned media or by word-of-mouth. When I meet them they already know they want me and all we have to decide is the price. When we have agreed this that’s is the end of the sales process. The next stage is delivery and my delivery of peace of mind for the client. At least that’s the theory.

Having seen the client, it is necessary to send the client an engagement letter or contract. The purpose of this is to ensure that we are clear on our respective responsibilities, and the client knows what she is getting for the fee she has agreed, and what she is not getting; in other words, what services are extra. The letter has more general legal stuff but essentially it is all about what she is buying and how much it will cost her for her peace of mind.

Honour bound

When I started work in the City it was an important tenet that a gentleman’s word was his bond. So was a lady’s. If we shook hands on a deal it was sealed. The paperwork was a formality. That was the way it always was. Just recently I have noticed a trend to renege on verbal agreements, and often not always in a straightforward way; not delivering the papers, or just going missing.

What to do about this?

Sam Goldwyn said “A verbal contract isn’t worth the paper it’s written on.” In reality verbal contracts are seldom enforceable and certainly if we have not yet delivered we do not wish an unwilling client to pay up for services or goods he has decided he doesn’t want.

We are familiar with the expression “caveat emptor”: let the buyer beware. In a difficult environment we must also think “caveat venditor”, let the seller beware. We must be absolutely certain the prospect has signed on the dotted line and is happy about the deal. It will save a lot of heartache.

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