Is Trust Enough in a Business Deal?

July 25, 2015
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“Aaron, if it isn’t in writing, it ain’t worth anything” my corporate lawyer told me as we were going through the final details of a twenty-page option agreement.

“That’s cynical,” I remembering thinking. I had done several business deals on little more than a handshake and never had any problems. Being able to trust the individuals I made deals with had got me far in the business world. But the fact was, my corporate lawyer and I were both right… The big deals require both a contract and trust.

As my lawyer and I proceeded to go through the agreement, appendix by appendix, I started to notice that if they really wanted to, the other party involved could change some of the spirit of the agreement down the road, without breaching the contract. I asked my lawyer how we could reword certain sections to prevent such a detour, and he told me some parts of the agreement “just are what they are”. And then he proceeded to tell me that “no contract or deal is perfect,” and there should be a high level of trust between the two parties going into business together… hmmm, that’s somewhat contradictory to his previous remark.  What happened to “if it isn’t in writing, it ain’t worth anything”?

The truth is, virtually every contract has vulnerabilities. I’ve heard people say that their contract is “ironclad”. All that means is that they have made an unfavorable deal for the other person/party involved, which is never good in a partnership.

There is almost always a way to get screwed in a contract. And there are people who you think you can trust that end up not being so reliable.

Some entrepreneurs jump into business deals with others because they feel confident in their lawyer’s ability to draw up the so-called ironclad contract. There is no such thing. You can’t have a successful, long-term partnership or joint venture with another entrepreneur based solely on the fact that your contract is strong and insulates you from damage. A contract on its own is not enough to make a deal work. However, in the same vein, trust alone isn’t enough.

In the modern economy, where technology advancements are changing how we operate every 6 months, regulations continually evolve and lawsuits are plentiful, you need both trust and a contract to make a business deal work.  If one fails, you have the other to fall back on…

Stay hungry,
Aaron Hoddinott signature

Aaron

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Like all of you entrepreneurs and investors out there, Aaron has been in the trenches. He is the founder of an influential online media and PR company. From oil wildcatters to mining prospectors, tech gurus to medical doctors, and even celebrities, Aaron has helped market and expand brand awareness for a diverse range of publicly traded companies ran by entrepreneurs from all walks of life.

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