What is a contract? It is an agreement based on terms meant to reinforce a relationship built on trust.
I have had the distinct pleasure of getting to help many entrepreneurs launch, maneuver and grow their precious visions into strong companies. One of the first items of business in these big efforts are contracts. They are needed for contractors, vendors, partners, investors, and sometimes, key employees, to keep the company on track. The lovely part of these relationships is that they are founded on trust. Trust is quite easy for humans to give, as long as they have not been burned too badly in the past.
Trust is actually our natural instinct. This trust comes from our ability to have a hunch about the person we want to work with. This hunch is based on a series of assessments of the person we want to work with, combined with the external business factors that define the scope of the relationship. These micro assessments can be based on a finding that there are shared values, the right timing, or confirming that the relationship is based on reciprocity. These micro assessments can drive amazing, groundbreaking business deals. With that said, a groundbreaking business deal doesn’t necessarily mean that it will be a lasting business deal. I have found from working with my clients that these micro assessments related to trust are typically loaded on the front end of the chronological timeline of the deal. Meaning, that they address how to start the business relationship, but not necessarily how to maintain or end the relationship.
Imagine, for example, a strong parallel example- marriage- one that many of us have experience with, either in our marriage or that of someone in our family. Imagine if, before you got married, that there was a social expectation that the new couple had to meet and discuss how they would maintain the marriage, and also what they would do if the marriage no longer worked out. Certain cultural groups do this already. For example, members of specific religious congregations provide pre-marriage counseling. For, another example, in higher net worth or mixed net worth couples, where a pre or postnuptial agreement, often negotiated by lawyers, is common. The key is that the conversations should focus on the foundation of trust, instead of say, only addressing only financial assets.
Let’s apply this to a business agreement. For longer-term relationships, such as an agreement lasting more than one year, I like to guide my clients by first, looking into the future of the deal to identify the potential challenges, as well as to discuss what the end of the relationship would look like. Once that is done, we can get back to finalizing the terms of the agreement.
Along those lines, Linda G. Alvarez, in the book, Discovering Agreement, provides a great list of questions that may be incorporated in a written agreement, in the “Dispute Resolution” section of an agreement, which could also be called “How We Will Address Change.”
Immediately following a statement that the parties shall agree to work together effectively, but that from time to time, circumstances change. In light of a change in circumstance, we shall use the following questions, before pursuing mediation or other legal remedies, to help us find a way forward:
- Does each of us feel we are getting what we anticipated? Is there something that is no longer working for one or both of us?
- What do we most appreciate about the work we have done together so far?
- Are there outside influences (or money) affecting how we are working together?
- What has worked well for us so far? How can we expand on it?
- Is it time to redefine or redirect our work together?
- Is there something difficult we are avoiding saying or doing?
- What do we gain by continuing/ending this work together? *
These questions help maintain trust, by balancing challenging conversations by balancing these pieces with what is working, while also keeping the bigger vision at the heart of the conversation.
To get started on your next agreement you plan to execute, see if you can break up your term sheet (summary of topics to be agreed upon) into the three categories of “Starting the agreement,” “Maintaining the agreement,” and “Ending the agreement.”
Good luck with your next big contract! And, of course, please contact us if you want to learn more, or visit our Resources and Blog pages for other resources.
* Alvarez, Linda G. Discovering Agreement: Contracts that turn conflict into creativity. Candescence Media (2016). pp. 210-211.