02Nov

The Point of No Return – When Does Chat Turn Into a Contract?

One of my spare time hobbies is Kayak Fishing.  In my imagination I haul in large Snapper every time I go out.  In reality I am pretty adept at dragging in big clumps of seaweed.  Part of the excitement when the rod bends, is not knowing what you might bring on board.   This uncertainty is part of the thrill of fishing, but not a great idea in business and in the business of forming contracts.

Business people who understand the basics of contract formation know when they are committed and know exactly what they are catching and bringing on board.  This group avoids the nasty surprises when people discover that they do or do not have the contractual relationship they expected.
The simplified diagram below illustrates some of the elements which are necessary to achieve a binding contract.
The increasing trend towards email and talking, instead of round the table negotiations, makes it much more likely that contracts are formed without ceremony and without a clear hierarchy of steps.   Often there will not be one single document capturing the deal or even no paperwork at all, with everything sorted in discussion.
To reduce the chance of you waking to a fishy green nightmare, here are 7 suggestions for things to be mindful of when you are doing (or not planning on doing) a contract deal:

  1. Until you are sure that you do want to be in a business relationship with another business, make it clear that discussions are preliminary and for the purpose of deciding if both businesses want to work together.
  2. If you are not sure you want a particular deal, signal this by using phrases like “subject to contract” in written correspondence or in speech.
  3. Do not assume that “subject to contract” will guarantee to mean just that if the behaviour of everyone demonstrates something else.
  4. Do not perform the contract in any way, until the deal is done.  Being helpful by just providing… etc. could leave you committed before you have decided.
  5. Do not believe that there is no deal because there is nothing in writing.
  6. If offers and counter-offers are flying around in emails, on the phone or in meetings it is worth taking the time to repeat or refer to the whole offered deal package in writing, in case acceptance happens with a lack of certainty as to what the deal is.
  7. Do not rely on a belief that the law will save you because of past legal decisions and well-known principles.  Life changes fast, so does the law.
To finish up, here are my two favourite fishing quotes:
“There’s a fine line between fishing and just standing on the shore like an idiot.” – Steven Wright

“My biggest worry is that my wife (when I’m dead) will sell my fishing gear for what I said I paid for it.” – Koos Brandt
Your choice; contract like an idiot or get the price you deserve!
By Jennie Vickers
Jennie Vickers has 20+ years as a lawyer and general manager thinking in a truly innovative and creative way, delivering great results. She is a passionate advocate for the need for advisors to be attuned with their clients using Thought Leadership, particularly in professionals services firms. An advanced instructor of Buzan Learning Techniques including Mind Mapping, Jennie is skilled in applying these tools to deliver value and creative efficiency in a wide range of disparate organisations.

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