Even If You Don’t Have to Dot Your i’s and Cross Your t’s, Contract With Care
The devil is in the details, unless you take care to cast him out
“Dot your i’s and cross your t’s” is an idiom from the 19th century meant to encourage schoolchildren to write by hand carefully and pay attention to detail. The concept was to be meticulous, precise and complete. In addition, the phrase was used by attorneys, bankers, and salespeople as a reminder to make sure everything on the contract is perfect and complete, leaving no room for misunderstandings or misinterpretations.
When you’re an entrepreneur and you’re trying to sell potential investors on the “big picture” (and/or big market, naturally), it’s essential to ensure you a) have everything in writing, and b) you check everything to make certain all clauses, details, and information have been included.
One would think EVERYONE would be “checking the fine print” (another old saying). Neither is meaningful in 2021. We don’t need to dot i’s or cross our t’s anymore, since we’re typing our communications. We don’t encounter much “fine print” — just pages and pages of text in a standard size font detailing the legally documented items in every contract and agreement.
Regardless, I encourage you to dot your i’s and cross your t’s and pay attention to the “fine print” because misstating or missing details or inserting additional sections that may not be necessary can change the entire tone of the agreement.
Don’t be this guy
For example, I recall one growing startup in my incubator where the CEO “knew it all.” I am, of course being facetious but if you spoke with this person you would either immediately say “wow, what an arrogant jerk” or “well, they are certainly self-confident.” (There’s a fine line there; more on that in another episode).
This guy was very self-assured and thought he was always right. In fact, he even said as much. “I’m not always right, but I’m never wrong!” might have originated with him. (Uhhh, we know how that turns out). Anyway, he “negotiated” an extremely large order for his nifty product with a major domestic distributor. He was quite proud of his sales abilities and that he’d locked down the contract.
Except for one small detail: He didn’t READ the contract.
It was, quite possibly, one of the more onerous supply contracts I’d ever seen (and believe me, I’ve seen a few). He paid no attention to the details of having to supply “the entire order in one shipment within 30 days of executing the contract.” (It was a massive order). He also ignored the “accounts payable cycle that essentially allowed the distributor to take 180 days to pay. (That’s a long time for a large receivable to be hanging out there, especially for a small company).
He also didn’t catch the clauses inserted by the distributor about “quality guarantees” (quality as determined solely by the distributor); “samples, spoilage and promotional items” (which basically let the distributor give product away for free to establish sales, at the vendor’s expense); and “zero backorder guarantee for future orders.” (The CEO could barely supply the first order, much less incremental orders).
To say it nearly ruined his company would be an understatement. It DID ruin his company, and he closed up shop.
Use your village
Typically, we would all have an attorney (and most likely our partners, other company officers, mentors, advisors, etc.) evaluate and carefully read any and all contractual agreements. Why? Because it’s too easy to miss some dots over the i’s or to overlook some t’s that aren’t crossed (metaphorically speaking, of course).
I’m not saying the world is full of people who are unscrupulous (although sometime one does wonder) or that everyone is out to cheat you. However, a “contract is a contract,” so it’s best to make sure that particular agreement says what you want it to say and says what both parties have agreed upon.
I’ve seen many, many circumstances where, in the excitement of getting that agreement done, some individuals have verbally made various statements that, in the final contract, were nowhere to be found. I’ve also had plenty of “did I say that?” or “I never said that!” retractions come forward when final signatures were required.
I recall one contract that went back and forth so many times that finally both parties were placed in a room (with plenty of coffee) with their respective attorneys and company officers and were told to “stay in that room until you come to an agreement that both of you can live with, and that both of you understand, and that has NO subsequent alterations”! It was amazing how fast the agreement was finalized once everyone was in the same room, speaking the same language.
But I’ve also seen plenty of agreements where the “fine print” was altered, omitted, or twisted to essentially change the tone of the agreement. Whole clauses were deleted, or new points inserted to favor one party over the other. Plus, long, engaged negotiations can sour both parties over the spirit of the agreement, and can lead to poor partnership efforts. Not to mention the massive cost of arguing over small points that may not truly affect the actual purpose of the contract.
I remember one discussion in particular. The parties were at odds over who was going to pay the fee for filing the registration of the new joint corporation with the state. The argument over this responsibility dragged on for nearly two weeks, with plenty of billable hours being charges to both parties. Just to keep this in perspective, the filing fee was a grand total of $85.00! I won’t tell you how much it actually ended up costing both parties but let’s just say it was significantly more than the simple filing fee!
Simply get it done, carefully!
It’s easy to complicate agreements/contracts as well, to make sure “everything is included.” While some agreements may seem simple up front, they can easily morph into hundreds of pages of legal phrases, jargon, CYA clauses (if you don’t know what those are, look them up) and on and on.
It’s definitely important to cover key points and to ensure no misunderstandings between the parties, but it’s also possible to get carried away and insert items that truly are not relative to the final arrangement. Be sure you stick to the point, and when you insert, alter or delete something, make it easy for those negotiating the agreement to see those changes.
This can speed up and simplify the negotiations so both parties feel they are fairly treated and they also feel the discussion is moving at a good pace. That keeps costs to a reasonable level and makes for a “cooperative” negotiation!
No one wants to be cheated; no one wants to omit an important clause or phrase in a written contract accidentally. However, in addition, we like negotiations to be cooperative, reasonably fast, and understandable.
So, dot those i’s — and cross those t’s — but don’t get carried away with adding too many i’s and t’s. Keep the spirit of cooperation alive while paying attention to details. It CAN be done!
Mark S Long has long experienced the intricacies of business incubation, acceleration, coworking spaces, makerspaces and other entrepreneurial assistance venues. UF Innovate supports an innovation ecosystem that moves research discoveries from the lab to the market, making the world a better place.
Originally published at http://incubatorblogger.wordpress.com on September 7, 2021.