My poor, destitute neighbour is in the midst of a battle that will cost her $62,000 on the sale of her home. She has to sell because she can’t make her mortgage payments or put food on the table. She doesn’t understand legal contracts or business matters.
Her Surrey realtor, who has entered into a dual agency agreement with my neighbour and the buyer, appears to have acted on behalf of his long-term family friend, who is buying the property. There is little to indicate that the realtor acted in the seller’s best interests. The seller is close to a nervous breakdown and will have to sell the house to someone she doesn’t want to sell to.
A cash offer of $62,000 more than the first offer and an appraisal verifying its real value is an obvious indication that the property was undervalued and sold in favour of the buyer. The property is in litigation with a caveat on it. This is a huge lesson for her to learn the hard way. She put her complete trust in her realtor because “he was a friend of a friend of the family.”
Before you sign anything, have a lawyer check and give you a thorough explanation. So many people buy and sell businesses, sign leases, make partnership agreements on a handshake, and sign other binding contracts without knowing first what they are signing.
Lawyers are in business to protect your rights. There are numerous areas where you should consult with a lawyer, from purchasing a business to selling one. Very few people understand the fine print on contracts and legal documents, yet once you sign on the dotted line, you have contracted to adhere to specific terms, and these agreements can be upheld in court.
To most people, contracts are just a bunch of words in a strange language, often signed without comprehension of their contents. In business, a verbal agreement or a handshake isn’t good enough. Although it is human nature to want to trust people, get everything in writing anyway.
The most common areas where a lawyer can help you follow:
1. Buy-sell agreements: If buying an existing business, have a lawyer review the vendor’s agreement – which can be one-side – with little protection for the buyer. A buy-sell agreement sets out the terms of both the purchase and the sale, setting parameters for both parties.
2. Partnership agreements: Although a partnership may seem ideal, the percentage that succeed is few. A partnership agreement protects both parties by setting down mutual guidelines, parameters, responsibilities and duties.
It clarifies the shared areas of management, such as distribution of net profits, the injection and withdrawing of capital, interest on capital investments, management duties, banking authorizations, accounting records, salaries, termination or sale, death, disputes, and arbitration.
3. Building and capital equipment leases: When you sign a rental lease, you accept full responsibility to pay for that leased space or equipment for the term of the lease. It is a contractual agreement to adhere to all the terms and conditions until the lease expires. Don’t assume, as many people do, that it is a “standard” lease. Have a lawyer review and explain it all to you before you sign.
4. Agent and distributorship agreements: Some businesses may involve the sale of products or services through an agent. You may also engage an agent to distribute your products or services, or you may act as an agent or distributor for other businesses.
Both parties have certain rights and responsibilities, which should be clearly defined in an agreement. Some agents require exclusivity, so think about including a performance clause and ensure that the agreement can be readily rescinded if either party are not satisfied with the other. Use a lawyer to draft and/or review these agreements before signing.
5. Disputes with customers: You hope it never happens – a customer decides to sue you for damages caused through your services or products. Your first protection against this common occurrence is a good liability insurance policy. Your next move is to consult with a lawyer to decide on the best form of arbitration. From the initial discussion with an unhappy customer to your meeting with a lawyer, keep your cool and document all conversations.
6. Corporate affairs: A lawyer can act on your behalf in corporate matters such as employment contracts with management staff, wrongful dismissal claims, patents and trademarks, collections and taxation disputes.
The more people you talk to about finding a lawyer, the more stories you will hear about both good and bad experiences. What works for one person won’t necessarily work for another. Perhaps the best advice is don’t ask your friends for referrals. If the relationship doesn’t work out, you may not be friends for long, just as my neighbour’s referral sadly backfired. Instead, contact the Canadian Bar Association at www.bccba.org.
Frances McGuckin is an award-winning small business expert, motivational business speaker and best-selling author of Business for Beginners, Big Ideas for Growing Your Small Business (Canadian edition) and Taking Your Business to the Next Level: An essential step-by-step success plan (U.S. edition), to be released April 2005 through Sourcebooks Inc. The U.S., Indonesian, Saudi Arabian and Thailand editions are due for release in 2005. She can be reached at 1-888-771-2771, e-mail at firstname.lastname@example.org.
This column is available for syndication. For information, contact Frances McGuckin at email@example.com.