"But it's not in writing...."

 "But it's not in writing!"  It's a myth that everyone seems to have heard before:  a contract is no good if you don't have it on paper.

The good news:  this myth isn't true.  A contract is an agreement, not a document.  Some contracts are oral, and some are written.  Some are signed, and some are back-and-forth emails.  Some are never discussed, but are just "implied" or "assumed", based on how the parties acted.

And sometimes, there are two contracts at issue:  the written contract, and the oral agreement reached before everything was written down.  In law, the oral agreement reached before the written contract is called the "parol agreement".  (For history and language buffs, the word 'parol' originated in the context of the promises a war prisoner would make prior to being released from captivity, and, literally meant, "giving your word".)

The idea works the same way in the law, as well.  If someone gives their verbal "word", a court can enforce those promises in the same way as a written contract.  And if the written agreement doesn't explain exactly what the parties intended, a court can look at the prior negotiations and agreements.

An opinion issued this week briefly discussed parol agreements, and restated the rule that, usually, a written agreement replaces an oral agreement.  See, Kjerstad Realty v. Bootjack Ranch.  The case involved a dispute between a realtor, demanding a commission, and the property seller, who refused to pay the commission (because the ranch was sold to a neighbor to whom the realtor didn't actually "show" the property).  The case was sent back for a jury trial.

In general, it is better to have written agreements.  Often, however, we take each other's "word", instead.  And the law will treat those promises the same as if they are written down.  So if you hear someone say the magic phrase, "But it's not in writing", tell them the good news:  it doesn't have to be.   

An Ounce of Prevention....

Benjamin Franklin coined the old saying, "An ounce of prevention is worth a pound of cure."  It's a piece of wisdom applicable to so many areas of life:  Eating well is much cheaper than a doctor's care later on.  Regular auto tune-ups can save thousands compared to an overhaul.

It's wisdom that applies in the world of small business, as well.  I encourage all of my business clients to make it a habit of consulting with their accountant, insurance agent, banker, and attorney (in that order).  Each of those professionals is trained to spot problem-areas before they turn ugly. 

Unfortunately, what happens too often is that the client was not consulting any of these professionals, and by the time the problem arrives at the law office, it has turned into a nasty business dispute, or full-blown litigation. The problem might have been prevented months or years earlier with an hour or two of consultation with an advisor.

In the legal realm, the issues often include employment contracts (and hiring and firing); misunderstandings about a business partnership (profit sharing; loss allocation; duties of partners; etc.); muddy and vague real estate leases; a do-it-yourself contract for deed (or any other do-it-yourself legal document); disgruntled minority shareholders; and any number of contract disputes. 

Of course, careful planning cannot avoid all future problems......but it certainly is the best medicine to minimize them. 

Whether it is "prevention" or "cure" that you need, the first step is to do something about it.  This month, make it your goal to keep your business heading in the right direction by having a conversation with your accountant, insurance agent, banker, and attorney (in that order).  If you need a referral or recommendation, we know some top-notch accountants, insurers, and bankers.

And, if you're facing a dispute that seems headed for litigation, it is always better to call the lawyer sooner, rather than later.  Often, a creative settlement can avoid a lawsuit entirely.  Or, if a jury trial is unavoidable, the time to begin preparing is right now.

Happy Father's Day

Thanks, Dads!!