To the Letter

Cover your butt and get it in writing to really seal the deal.
Magazine Contributor
3 min read

This story appears in the December 2002 issue of Entrepreneur. Subscribe »

In the ideal world of deals, all agreements would be in writing and signed by everyone involved. In the real world, however, deals are often struck without time to hash out a contract or when you know full well that the other side simply won't sign anything. In fact, sending out an agreement that never gets signed can look worse than never sending one out at all-in a dispute, your opponent will always be able to argue (correctly or otherwise) that because they didn't sign, they never actually agreed to anything.

When you can't get it in writing, a reliance letter is a good second choice. Basically, the letter confirms an oral agreement with a legal hook at the end: "If the terms contained in this letter are not a completely accurate description of our agreement, please notify me in writing immediately, as I will rely on these terms in moving forward with our agreement."

Essentially, the letter warns the other side that you're about to spend time and money or lose other opportunities because of their deal and puts the onus on them to say you shouldn't. The longer they wait to respond to the letter, the more you have relied on the terms and the more binding the deal becomes.

When appropriate, you can even give them a deadline. It also helps to copy other people on your letter-it gently ropes in others who might later be valuable as witnesses.

Keep in mind, however, that using blunt language may hit a nerve and provoke a negative response from the other side. If you want your letter to be a little smoother, try this: "Please let me know if I haven't described our deal accurately."

When used artfully, a reliance letter floats like a butterfly and stings like a bee. (Luckily, the counter- tactic is simple. If you receive a reliance letter that's inaccurate, just set the record straight by writing back, promptly.)

Being right is one thing, but proving it (in or out of court) is quite another. Whether you're relying on a reliance letter or a signed agreement, always remember to keep organized files. Make it a habit to take fresh and accurate notes of all events and conversations. For clarity, try using different color inks when recording different conversations.

In addition, preserve evidence. Hold on to all versions of paperwork. Accumulate a big, fat file of receipts, letters, bills and other documents, and, if possible, keep all originals. If you can, get copies of what the other side's got in its files. And having pictures, witnesses, videotape and physical evidence may also come in handy.

Finally, don't neglect your e-mail correspondence. Keep it. Review it. People often forget that the digital record is the most permanent of all. More than once have my clients found the smoking gun buried there.

A speaker and attorney in Los Angeles, Marc Diener is the author of Deal Power.

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