With A Handshake And A Smile

Happy Monday, everyone.  Last week, a client told me some fish story about putting together a contract for the purchase of a marina on the back of a napkin.  No, I am not making this up and I am sure that you have heard stories just like this.  They are usually told when: 1) bashing lawyers for being lawyers; or 2) people labor under the false belief that life used to be easier and less complicated (ask a guy from 1753 if he'd rather live in his own time or enjoy the modern amenities of soap, dental care, air conditioning and TIVO).

Now, for the moment, let's ignore that this story is about 500th time I've heard of a deal being put together on the back of a napkin (and who can tell, by the way, what's the front or the back?).  Let's also ignore the fact that this client is in a world of legal trouble based upon improper documentation and failure to keep accurate and necessary records.  The idea of napkin-based transaction is....well, stupid.  It's like the handshake and a smile deal.  "Aw, you should have been there.  Bill was the kind of guy who didn't need any fancy contract.  He just made deals and shook on it."

I wish I could recount the number of people I've heard this about.  I also want to confirm for you that not a single one of these persons is still alive and the second part of the story always seems to be about their subsequent financial hardship or the mess they left behind when they died.  There is not a mogul or millionaire out there who does business like this.  Another client I have who made a fortune hates and despises lawyers to the core of his soul, but he employs an army of us to keep his money and his future safe.

Certainly, transactions can be simple.  But nothing - and I repeat - nothing can be fully documented on the back of a napkin.  The law says contracts HAVE to have certain terms to be complete.  There has to be a price and consideration and, depending on the deal, quantity, quality and time for performance.  I cannot describe to you how much trouble I have convincing people that "just agreeing" to something is not as easy as they want it to be.  The maze of laws and regulations out there that complicate every great deal born in concept demands that you determine and agree to who will deal with what risk and what contingency.  Oh, and let's not forget that certain contracts require certain other formalities, like witness signatures, documentary stamps, attestations or seals or certain "magic words."

By the way, if you're drafting your contract on a napkin, it's likely because you're at a bar and, logic would have it, you've been drinking.  That's always a good time to negotiate a deal and commit it to writing.  Really, what could possibly go wrong?