Contract Cons

If you think the other side is sneaky, read this.
Magazine Contributor
3 min read

This story appears in the October 2001 issue of Entrepreneur. Subscribe »

Forged signatures, replaced pages, retyped wording and the like are all nasty realities for the deal-maker. Can you really safeguard against fraudulent documents? If it weren't so inconvenient, you could have a document examiner go over every line. But that's like protecting against food poisoning by bringing a personal taster and lab technician to every meal.

Instead, take a realistic approach and use these practical precautions to help protect you from fraud:

1. Use your own eyes. In 1992, colorful Italian financier Giancarlo Parretti, who at one time controlled MGM, was indicted for offering altered corporate documents into evidence. The paper in question was a fax that had phony date lines pasted onto it from another fax. Sometimes, forgers are sloppy. So take some time to inspect. If it looks like a valid signature was cut out and photocopied over, it probably was.

The photocopier was the best thing to happen to the document forger since the invention of tracing paper.

2. Keep originals of important papers. Let others settle for copies. The photocopier was the best thing to happen to the document forger since the invention of tracing paper. Now, even an amateur can produce a respectable counterfeit. Always sign with a blue ballpoint pen; it makes it easier to identify originals.

3. Keep copies of everything-especially of what you send out. Make sure it comes back without alterations. This also gives you a record of what you signed and what samples of your signature the other side has. On the flip side, hold onto signature samples from the people on the other side; it will make it much harder for them to deny later that they signed something.

4. Sign every page. It's easy for your opponent to slip phony pages into long contracts; signing each page will help you prevent this. If there are handwritten changes, make sure both sides initial each one of them as well.

5. Never sign documents that have blank areas. Make sure all the information is filled in. Don't sign documents with lots of blank space between paragraphs or ones with more than 2 inches between the last line of text and your signature. It's just too easy for a con artist to add new terms and conditions to your deal.

6. Consider notarization. It's good protection; in fact, it's required for certain public filings. A notary attests to a signature's validity after witnessing the actual signing and reviewing proof that the signator is who he or she claims to be. The notary then affixes a notarial stamp or seal and signs and dates the document.

7. Read what you sign. Obviously. If you're used to buzzing through stacks of paper, you may later regret your "efficiency" at signing things so quickly.

8. If necessary, use a local document examiner. Thanks to high magnification and other techniques, an examiner can analyze handwriting, paper, writing instruments, type, ink, language, grammar and syntax to unmask a fake.

A speaker and attorney in Los Angeles, Marc Diener is the author of Deal Power: 6 Foolproof Steps to Making Deals of Any Size.

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