Post: #1

Mr Money Mustache had an interesting article the other day about contracts, the jist of which was contracts are pointless. That personal honor and integrity is the main thing, and that if someone wants to screw you, a contract at best only marginally helps you in getting your money.

Granted, as he does concede, for larger things like house purchases it's probably a good idea, but for things under $1k, a contract is at best a ticket to court, more time and costs, and then there's the issue of actually collecting.

http://www.mrmoneymustache.com/2017/04/2...uarantees/

Quote:Business partners sometimes turn evil, tenants stop paying rent, girlfriends or boyfriends dump you, products break, stock markets crash, bones break, and fatal diseases strike your loved ones.

I agree – life has been known to serve up the odd Platter of Shit from time to time. Every one of those things above has happened to me. And yet in zero of the cases could I have protected myself with a contract or warranty and come out ahead.

I’ve been to court a few times. In some cases, I was the landlord and the tenant wasn’t paying rent even though we had a contract. The judge ordered the tenant to pay. The tenant, who had long since left town, didn’t even know there had been a court case. And yet life went on, and the inconvenience was soon forgotten.

I have always agreed with that mantra. If I have a contract with someone say a landlord not fulfilling their end of the agreement, I would simply chalk up a loss and experience, break the agreement, and go on with life. Even if you lose a deposit or whatever, probably less pain than continuing a relationship with a party not acting in good faith.

The United fiasco is the perfect example. Whether or not their contract allowed them to pull this guy off (true overbooking vs bumping to allow employees to fly) you'd be hard pressed to argue they didn't act like cunts and weren't acting in good faith. Thoughts?

Post: #2

Agreed -- but the presence of a contract could maybe sway a bad party on the "ehh, I'll mess with the other guy who I don't have a contract with" line... so in this case, it's a signaling mechanism that you have your shit together and keep records...

I see a contract as basically the paper way to encapsulate what our "man to man, spoken agreement" was.

Post: #3

I don't know - I'm a lawyer so pretty biased but I would recommend a contract. The way it helps you get your money back is you threaten to sue the opposing party for damages, which may be significantly more than the actual price of the contract - so you can use that threat as good leverage you otherwise wouldnt have.

Post: #4

Weigh the opportunity costs -

Does it make sense to fight it and hopefully win based on the reward and the money spent pursuing victory (remember, time is money too, and there's also a possibility that the other side has better lawyers and will squash you even if you have a case).

Or does it make sense to let it die and pursue a bigger goal and reward in another path.

There's a time and place for both.

Although victory is sweet, if it is ultimately a meaningless victory and takes away from the pursuit of greater wealth or development then it is actually quite pointless. I think as you grow wiser you learn to pick your fights.

Post: #5

(04-27-2017 01:07 PM)monster Wrote:  Weigh the opportunity costs -

Does it make sense to fight it and hopefully win based on the reward and the money spent pursuing victory (remember, time is money too, and there's also a possibility that the other side has better lawyers and will squash you even if you have a case).

Or does it make sense to let it die and pursue a bigger goal and reward in another path.

There's a time and place for both.

Although victory is sweet, if it is ultimately a meaningless victory and takes away from the pursuit of greater wealth or development then it is actually quite pointless. I think as you grow wiser you learn to pick your fights.

I guess that was sort of the point. If you made a pie chart with the reasons why agreements are honoured, it would likely be 90% "because the person is honest" and 10% "because they are bound by a contract".

A contract only gives you better leverage to throw good money and time after potentially bad. In the situation quoted by MMM about a tenant who bailed then didn't even know there was a case against them, he's markedly worse off by just not having dropped it. If they're the kind of person not to honour a contract by choice, why would they honour a judgement?

Honestly I prefer to be able to do business on a handshake. You may get burned once or twice, but you save yourself the potential future much bigger of dealing with people you can't trust. That's why I like lending token sums of money to acquaintances I don't know that well. If they go out of their way to get it back to me ASAP, I know they have a bit of character. If they hem and haw and consider it a gift unless I actively hassle them, or worse go blank, then it too was a valuable lessen that cost me relatively little in the big scheme of things.

Post: #6

Depends on the parties and the sheer value of the issue.

You can even do a verbal contract and record it. That is the fastest most effective way - no need for a written one, that gets notarized and rubber-stamped by a lawyer.

Post: #7

(04-27-2017 01:40 PM)Seadog Wrote:  Honestly I prefer to be able to do business on a handshake. You may get burned once or twice, but you save yourself the potential future much bigger of dealing with people you can't trust. That's why I like lending token sums of money to acquaintances I don't know that well. If they go out of their way to get it back to me ASAP, I know they have a bit of character. If they hem and haw and consider it a gift unless I actively hassle them, or worse go blank, then it too was a valuable lessen that cost me relatively little in the big scheme of things.

I would never do anything over $500 "on a handshake." Contracts are always good as leverage to go through courts if you need to as a backup. Unless you're in the mafia

And what do you really think someone you lend $100 to is going to bring you in the future? A bigger deal? If they were capable of bigger deals they wouldn't be needing to borrow $100. If you have to borrow $100 from someone and are a man, you're not capable of managing money and shouldn't be doing deals.

Post: #8

"Honor" and all that is fine, but look at contracts as an extra (and relatively powerful) way to back up your interests and protect yourself. Contracts definitely aren't pointless.

Post: #9

Contracts aren't pointless. TRUE, they aren't an automatic I-WIN document and enforcing a claim will still cause some significant effort, stress, time and money expenditure, even if you're 100% in the right and eventually win. But that is why contracts are good, as a sort of deterrant mechanism so the other party also considers if it's worth it to break it and then get tied into a lawsuit. Fun fact: most contract disputes on a B2B level never reach courts because both parties realize that courts are inefficient and try to solve their issues via arbitration or mediation.

Also, a little pedantic but often overlooked but nevertheless important factor of contracts: they are a good way for both parties to double check and be sure they both understand what the conditions are that they want to agree to. Sometimes, not even out of malice, people leave things unsaid so everyone assumes something different on what their obligations are. When you have to fix those in writing, it's a good way to sit down, think about them and to formulate them.

Post: #10

(05-04-2017 12:50 PM)I DIDNT KILL MY WIFE Wrote:  Also, a little pedantic but often overlooked but nevertheless important factor of contracts: they are a good way for both parties to double check and be sure they both understand what the conditions are that they want to agree to. Sometimes, not even out of malice, people leave things unsaid so everyone assumes something different on what their obligations are. When you have to fix those in writing, it's a good way to sit down, think about them and to formulate them.

Exactly. "Here, in writing, are the terms which govern our arrangement." If drafted well, contracts will lay out the entire arrangement and conditions as unambiguously as possible.

Post: #11

(05-01-2017 04:40 PM)ChrisGaines Wrote:  "Honor" and all that is fine, but look at contracts as an extra (and relatively powerful) way to back up your interests and protect yourself. Contracts definitely aren't pointless.

This is why I added the caveat of "day-to-day" things. An immediate example that jumps to mind, is that I had a contract for a few hundred dollars of basic web design work 15 years ago. I performed the work. Gave him his webpage, he never paid me. More or less disappeared. Ended up deleting all the work off his server out of spite, but would have much preferred the money. Meanwhile I kept his down payment.

I don't see the connection between a contract and getting paid, when person can't be reached and wont respond. Given that there was a contract and they're so powerful, how would you of suggested I recover this money, with high certainty, and do so while investing less than the $300 at stake, or ~10 hours of my time.

Post: #12

(05-04-2017 11:56 PM)Seadog Wrote:  

(05-01-2017 04:40 PM)ChrisGaines Wrote:  "Honor" and all that is fine, but look at contracts as an extra (and relatively powerful) way to back up your interests and protect yourself. Contracts definitely aren't pointless.

This is why I added the caveat of "day-to-day" things. An immediate example that jumps to mind, is that I had a contract for a few hundred dollars of basic web design work 15 years ago. I performed the work. Gave him his webpage, he never paid me. More or less disappeared. Ended up deleting all the work off his server out of spite, but would have much preferred the money. Meanwhile I kept his down payment.

I don't see the connection between a contract and getting paid, when person can't be reached and wont respond. Given that there was a contract and they're so powerful, how would you of suggested I recover this money, with high certainty, and do so while investing less than the $300 at stake, or ~10 hours of my time.

You're always going to have people skip or judgment proof people, but a contract acts as an extra barrier to that. They aren't foolproof, but a well-drafted contract will allow you to sue for breach and damages, outline your rights and responsibilities and those of your clients. In this case, you could sue the business on whose behalf you performed the work under breach of contract/unjust enrichment for the damages incurred (your cost plus interest/whatever penalties stated within the agreement). Yes, they could be judgment proof and you get nothing. But instead of simply saying "sure I'll perform work for $X" and not getting paid at all, you have a document outlining the terms.

For individuals or clients that can more easily "disappear," require more money up-front (half at time of engagement, half at completion or something) or require upfront payment in full. Clients who refuse this will more likely than not be clients that wouldn't pay in the first place, therefore helping you avoid this situation.