Planning, Startups, Stories


Tim Berry on business planning, starting and growing your business, and having a life in the meantime.

Never Do a Contract When a Letter Will Do 2

I admit I probably shouldn’t be posting this because I’m not an attorney, so I don’t give legal advice. This is just anecdotal, based on what I’ve seen in my business experience. Consult your attorney. I worked for years with a smart, honest business lawyer who — well, let me get to that later in this post.¬†

First, however, here’s what I’ve seen in several decades of running a business.

  1. Your should always get the specifics of a deal down in writing. They should be discussed, negotiated, agreed, and and signed. But that doesn’t often mean “a contract” negotiated with and by lawyers. A simple letter, and in many cases an email, is sufficient.
  2. The real purpose is getting an agreement defined well. Contracts are for special cases. In my opinion.
  3. I’ve never seen a contract end up with some judge or legal authority reading its details and deciding what gets done.
  4. I’ve spent excruciating hours, several times, working through the details in a contract full of formulas and hypothetical situations, none of which made any difference when the business relationships fell apart.
  5. In every one of those cases, we ended up in mediation. It all came down to negotiation at the end. The detailed contracts were just framing.
  6. I’ve several times failed to get a contract enforced when a big company was on the other side. “We don’t agree with your interpretation,” I was told in once instance. The unspoken challenge was “so sue us.”
  7. The real value of the vast majority of contracts is only the same as in a simple non-legalese written agreement in email or as a letter. It gets both sides clear on what they’ve agreed, and serves as a reminder later. And for that, you can get as much utility in a well-written non-legalese short letter as you do in an excruciatingly detailed contract. Do get it in writing. Do agree and sign. But call that a letter, not a contract.
  8. I’m not knocking contracts where they’re needed: employee-employer relationships, confidentiality, non-disclosure, consultant, programmer, author and publisher … these are usually boilerplate. They aren’t worked to death for each case.

This is just my opinion, and I’m a business owner, not a lawyer. Regarding the smart business lawyer I mentioned, he warned me more than once that spreadsheet and-of-contract formulas would be hard to enforce and would probably be moot anyhow, since disputes would most likely end up in mediation.

(Image: Mircea RUBA/Shutterstock)

  • Pingback: Tim Berry’s Wisdom of the Week

  • Pingback: You Didn’t Get It in Writing? I Told You So. Now What?

  • http://20minus.com Thanasis Polychronakis

    This is a very interesting view and i really see the spirit of it.

    However i have to ask, in the Internet industry we are venturing on, “contracting” work between two parties most of the times is about technical services or services in general. Like e.g. programming, designing, marketing etc…

    How can your company be secure of any IP issues by the contractor in the future? If you are to become a successful company, and that’s everybody’s aim, you become a target to these kinds of attacks. Either it be the IP of a contracted programmer or the art of a designer.

    Will an e-mail suffice in those cases?

    Not to mention what can happen in case of you loosing your IP by a contracted programmer…. He / she has the most of your codebase, what stops him from selling it in the future when it’ll be worth something?

    • http://timberry.com Tim Berry

      Than, thanks for the addition, and for the record I agree with you on the need for detailed legal attention in this case. It definitely falls under my last point, where contracts are needed. Tim