Alan Sugar once said:
I have always been an honest trader. I come from a school of traders where there was honour in the deal. No contracts, just a handshake and that’s it, done. That’s the way I prefer to do business…
Can You Contract with a Handshake? looked at the perils of this approach, also known as the gentleman’s agreement. You won’t be surprised to know that I suggested that even a simple contract is better than none!
One-upmanship
Over the last 20 years, I have written, adapted, reviewed and negotiated many construction contracts. My experience is that the parties/their lawyers treat contracting as a form of one-upmanship game:
The creation and negotiation of many building contracts is based on the premise that the other party is the opposition and cannot be trusted, and that consequently there is little or no room for allowing flexibility or achieving harmonised interests… David Mosey, Early Contractor Involvement p43
Is it because drafters believe (and are instructed) that a contract has to protect one party at the expense of the other? Do they focus on bad pennies not the honest trades referred to by Alan Sugar?
But as disputes continue, legislation expands and cases provide precedents, contracts that seek to pre-empt disputes just get longer. That’s why shorter contracts appear to be an anathema to the industry. Peter Hibberd, then Chairman of JCT, argued in his 2014 paper How Difficult is it to Write a Standard Form Contract?
At the simplest level all that is required is a description of the works to be carried out and a price or price mechanism; the rest of left to common law and statute … The advocate of the one sheet of A4 standard contract is easily satisfied – indeed a whole page is too much. That might have worked two hundred years ago… because trust was more obvious…
Should we really be stuck with an image of our industry that is based on low trust?
A different perspective
Stephen MR Covey in Speed of Trust says:
Someone once asked me why we put business agreements in writing if we trust the other party. My response is that agreements identify and clarify expectations, which actually help preserve and even enhance trust over time… I’m not against handshake agreements, but I prefer that they also become written agreements so that expectations regarding both parties are clear.
However, even written agreements have their limitations and are not able to replicate trust. In fact, where I have problems with legal agreements is when they are written in one-sided, adversarial, non-trusting language, or where they are intended, de facto, to serve as a replacement for a relationship of trust
Clarity is critical to the success of your contract. But trust is critical too. Your contracts can make space for both these concepts.
What should you do?
Review your next contract (using my STAR analysis) to see if it builds or destroys trust.
