If a customer won't sign a contract, do you want them as a customer?

Over the past 20 years (technically it will only be 20 years on April 1) I’ve had many issues that seem to come up over and over in talking to new clients. Lately, the latest issue to come up again (and again) is getting a signature on an agreement.

The facts are generally the same: the new client has been in an industry for years and they have always done business on a handshake. They believe everyone in their industry does business on a handshake and they will lose business if they insist on putting the terms of business in writing and have both parties sign the agreement.

The new client is now retaining our firm to try to enforce a verbal agreement and spending a lot of money in legal fees to do this.

What I’ve learned from 20 years of Business Law regarding the above is:

1. There is no industry that does business on a handshake – there are businesses within an industry that have done business that way for many years. However, slowly those businesses are being burned by customers and everyone is moving to putting terms in writing.

2. A customer who will not sign a piece of paper setting out the terms they are willing to “handshake seal” on is a customer who has no intention of sticking to those terms.

3. A customer who will not commit to terms in writing is a customer who will take up your time and money chasing them for payment and is probably not the customer you want to have.

A simple agreement setting out what each party will do and what will happen if they do not, does not hinder getting new business: it ensures the business you get is worth having.

Inga B. Andriessen JD