Can’t I just do this contract myself?
Yes, of course you could. But, how many times have you done this type of agreement before? Are you comfortable that you’ve thought through the ways that things could possibly go wrong after the signing? Are you locking yourself into something that may be useful now but may not be if things change in a year or two? Are you evaluating only the current risks, or have you thought about how the risks might change over time? And how much of an impact would those potential negative effects have on your business or career if they became a reality?
We all enter into contracts all the time. Sometimes it’s not even worth reading what we’re agreeing to (did I really just say that?). Think of when you enter a parking garage and receive a ticket with five paragraphs of micro text on the back. Other times, we would be very poorly served if we did not take the time to go through and carefully craft and negotiate every provision, as when we enter into an employment agreement, or an agreement to sell the family business.
The vast majority of contracts fall in between these extremes, of course, and we have to use a cost/benefit type of analysis to determine the right level of attention and expense to devote to each contract we’re asked to enter. At least, that is my hope, that you, my friend and/or colleague, will take a minute to do something like a cost/benefit analysis for each potential agreement, even if it’s really just a quick and high level assessment of these three basic topics:
1. Flexibility: How long am I going to be bound to this agreement if I later decide I need something different? Often, we agree to things that lock us in unnecessarily; did you know that cell phone service companies actually do have terms shorter than 2 years, even month-to-month, and you can often still get device discounts, if you ask? Flexibility prepares us for the unknowns of the future.
What other aspects of my business or personal affairs are likely to be affected by this contract?
2. Relative value: Worst case scenario, how much could this cost me if things go wrong? On the flipside, how much could this be worth if things go right? Are those amounts that mean something to me? The higher the numbers, both positive and negative, the more effort (and/or cost) we should be willing to expend up front to ensure the greatest likelihood of enjoying the possible benefits but avoiding the possible detriments.
3. Ripple effects: What other aspects of my business or personal affairs are likely to be affected by this contract? Sometimes we forget to analyze a decision that’s right in front of us right now in light of the decisions we’ll be considering tomorrow, or a month from now, or next year. For example, should you really save $20 a month by locking in your internet service for 3 years if you think you might relocate your office at the end of your lease 6 months from now? Will your 2,000 square foot office space be all you need for the next 5 years, or might you need to upsize or downsize after the next election cycle?
Sometimes we can’t answer all these questions alone; that’s when it’s great to have business partners, life partners or professional advisors to bounce things off of, or to enlist in doing real work to help us analyze, craft, and negotiate contract provisions. Especially whenever your counterparty is asking you to give up flexibility, when the contract matter is worth a material sum, or when the subject at hand is going to affect other foreseeable decisions later on, it’s going to be worth doing a cost/benefit analysis, and potentially trying to negotiate offered terms to better suit your needs. You may even benefit by hiring someone to help you craft the agreement to limit your risk and create the most value possible, as there are likely professional advisors, like those at Spillman&Partners, who have done exactly what you’re doing with this contract dozens or hundreds of times before.