By Steven A. Kronenberg
An excerpt of this article appeared in the September 2011 NMPAN Newsletter. Steven Kronenberg, an attorney focusing on the food processing, grocery, and restaurant sectors, volunteered to write this for NMPAN in hopes of helping our members avoid problems -- and litigation -- that can arise when verbal agreements don't pan out.
Are you still doing business on a handshake? Written agreements help avoid disputes with your business associates, employees, and customers, so you can focus on running your business and minimize the risk of expensive and time-consuming litigation.
No matter how much you trust someone, misunderstandings are inevitable, take time away from running your business, and hurt the bottom line. People innocently remember “facts” differently. Memories fade. Doing business can complicate relationships between friends or family and make it more difficult to resolve disputes amicably.
Written agreements help everyone understand expectations before disagreements arise. In fact, many states have laws governing business relationships if there is NOT something in writing. Do you know what those laws say in your state and what conditions they would impose on your business? Are those conditions consistent with everyone’s understanding? If not, you may be able to change something by written agreement.
Would you and your business associates answer these questions the same way?
Written agreements specifying job duties, compensation, benefits, and related issues will help employees understand your expectations. They also help measure productivity, so you can better predict costs and profits. Employees can determine they are doing their job effectively, boosting morale. If conflicts arise, written agreements signed at the beginning of employment can help employees understand the basis for your decisions (even if they disagree), minimizing the risk of litigation.
Would you and your employees answer these questions the same way?
An employee manual may also reduce litigation risks by preventing problems before they start. For example, workers are less likely to engage in racial harassment if, at the beginning of their employment, they agree to follow your written policy prohibiting it.
Written terms and conditions of sale help buyers understand what is being sold for what price, so they feel confident doing business with you. This is especially important for perishable goods, so disputes can be resolved while they may still be saleable.
Would you and your customers answer these questions the same way?
It is usually simpler and cheaper to prevent disagreements than resolve them after they happen. Written agreements between you and your business associates, employees, and customers help everyone understand their rights and responsibilities and make the most of these relationships, saving time and money that can be better spent on running your business.
Steven Kronenberg is an attorney in the San Francisco office of Murphy, Pearson, Bradley & Feeney, where he offers outside general counsel services for the food processing, grocery, and restaurant industries. He is also the author of foodlawblog.com. He can be reached at 415-788-1900 and firstname.lastname@example.org.