Failing to document your business dealings can be a fatal mistake. We are talking here about the standard sorts of documents that smart people use when:
- Borrowing and lending money
- Leasing property
- Hiring goods
- Selling goods
- Supplying professional or trade services (think “the fine print” on the back of an order form)
- Buying or developing property with friends
- Going into business together;
- And the list goes on
There are usually only two reasons that people make this fatal mistake:
- They think that nothing is going to go wrong; or
- They want to save money.
Of course no one will ever actually say that “nothing will go wrong”. But the truth is, subconsciously, most people feel nothing will go wrong unless they can actually see a problem in their specific situation. If they can’t – they feel they’re safe.
This is simply naïve.
People change their minds. The economic cycle shifts, and people who had plenty of money suddenly don’t. People are made redundant. There are illnesses, affairs & divorces, deaths and injuries. These are the things that people don’t see coming, but they turn people’s business lives upside down every single day.
Failing to document your legal relationships and transactions are an absolute recipe for disaster.
These unexpected factors that drop into business situations create a new dynamic. Two or three people who were all pulling in the same direction yesterday are suddenly pulling in different directions today. And you have a dispute where no-one ever expected it. Without a proper agreement, you cannot know where you stand in that dispute situation.
If everything is agreed verbally, then a dispute usually means two inconsistent stories. Want to fight for your rights in that situation? Then you might as well toss a coin, because the judge has to decide who is telling the truth.
People think it’s expensive to have legal contracts prepared. But documenting an agreement costs a fraction of what it costs to resolve a dispute in court. And that’s where disputed transactions that are undocumented end up.
It is a fact that failing to document your agreements makes lawyers many tens of thousands of dollars’ worth of fees as they deal with your case through the court.
We know of a very substantial property deal between business associates who knew each other very well. The parties, who weren’t lawyers, documented the deal themselves. It went bad because suddenly, one partner found he was getting divorced, and his wife had her hand out for a million dollars. This was not expected. So he sued the other partner to try and get money out of the deal early. Well over $800,000 in litigation costs got spent in that case
The deal should have been properly documented. If it had, a 10 day Supreme Court trial would never have happened. The sad thing is, documenting that deal would have cost about $5,000.
Why risk paying a lawyer tens or hundreds of thousands of dollars to clean up a mess? Get them to write you proper contract in the first place!
Call Your LegalHQ now to get the protection of a properly documented transaction. The number to call is 08 9445 9200
We will meet with you, discuss the transaction and by the end of the meeting, you will know:
- What risks you will be taking on;
- How you can be protected; and
- What your cost to obtain that protection will be.
Call us now for protection from the unexpected events which turn happy business relationships into disastrous business divorces.
We regularly prepare many standard types of documents such as:
- Commercial Leases
- Assignments of leases
- Franchise agreements
- Loan agreements
- Licence agreements
- Trust deeds
- Superannuation trusts
- Shareholders agreements
- Business succession agreements
- Confidentiality agreements
Would you really want to have to explain to your spouse that:
- The person you lent money to is not paying, and is now claiming it was a gift, you now have to choose between losing the money or paying lawyers to get it back?
- The person you’ve gone into business with might have a gambling problem you didn’t know about, but you can’t stop them taking money out of the account because they’re a partner?
- The person you are building a house with has decided they just “don’t want to do it any more”, the house is half finished, you can’t afford to finish it by yourself and the bank wants more interest every month?
- The friend you bought real estate with has lost their job, can’t contribute to the mortgage but won’t agree to sell because “the market is rising”, but while its “rising”, you’re paying the bank?
- Your business will be calling in the liquidators because your biggest customer is going broke (while the customer’s director still has his BMW because you didn’t have him sign a personal guarantee), and you’ll be selling your house…..
It is a fact that we see many business owners and ordinary people who have gone into legal relationships without documentation. Clients come to us all the time with horror stories about situations where:
- They went into a transaction with someone;
- Things are not working out;
- They are losing money hand over fist; and
- The person they “went in with” can’t or won’t work the situation out.
People in those situations sometimes end up bankrupt, or suffer severe financial disadvantage caused as they try to extricate themselves from a legal situation which was easy to create but very difficult to get out of. In that situation, we provide legal assistance to get them clear of the situation. But the solution often comes a great cost.