People Over Paper

Several years ago, I started looking at what being a lawyer focused on serving conscious business would look like. I realized one of the key ways to deliver value to those clients would be to build and protect the kind of business relationships that would help drive their companies forward. Once I headed down that rabbit hole, one of the first questions I asked myself was “what are people looking for when they come to see a lawyer?” As I thought through experiences with past clients and talked with current clients, a theme quickly emerged, protection.

When someone came to me to draw up a contract, they were typically looking for protection in a new business relationship. They are often in situations where they have to make themselves vulnerable to someone they don’t know that well. A good example is a past client of mine (let’s call her Martha) who developed retail products and brands. Martha was a creative genius and she had this innate ability to conceive of products that would attract people, but Martha’s business model didn’t include actually manufacturing and distributing the products. For that, she needed to partner with other companies.

One time Martha came to me to get a contract drawn up for a deal with a new manufacturing partner. There were time pressures involved and Martha wanted to move quickly; she was also concerned about this new partner company. She hadn’t had time to fully vet them, and the deal terms would require her to invest significant resources at the outset. She asked me what we could do to protect her company in the transaction.

I drew up a contract with lots of terms to protect Martha’s company. The general pattern of those terms was to require that the manufacturing partner take some action, and then to specify a consequence that would happen if they either failed to do something they were supposed to or did something they weren’t supposed to. They started in on the venture, but in just a few months problems erupted. The manufacturer missed several important benchmarks and payments to Martha’s company. Martha invoked the contract provisions that specified consequences for the missed benchmarks and demanded the partner catch up on payments. Threatening letters were exchanged, lawyers got involved and eventually, litigation was filed. After a while, the case settled with Martha compromising her company’s claims in the interest of moving forward with other business.

Some time later, Martha came to me again about another business partnership she wanted to form. This time, she was looking at starting a spin-off business with another individual as co-owner. When she asked me about the contract she mentioned the earlier case and said she hoped we could avoid a repeat of that situation. Since the end of that case, I had begun offering clients a new kind of contract, sometimes called Conscious Contracts®. Conscious Contracts abandon the idea of trying to predict all the bad things that might happen over the course of a contract and setting a predetermined result for those bad things. Instead, Conscious Contracts create a system where the parties have the tools to address problems that might arise early and collaboratively. The first step in creating that system is for the parties to agree on a set of guiding principles for their relationship and that means that they have to spend some time sitting down and talking with each other about their vision for the future and the values they want to guide them. I facilitated several such discussions between Martha and her new potential partner. At the end of those discussions, the two of them realized that they had no business being in business with each other. It wasn’t that either of them was a bad business person, they just weren’t a good fit with each other. They went their separate ways and parted on friendly terms.

I was a little worried that Martha would be upset and feel like she had wasted money by paying me to facilitate conversations for a deal that never happened. We met afterward and I raised the subject with her. “Are you kidding?” she responded. She told me that she would much rather take some time and spend some money up front to figure out that things were going to go off the rails then to get into a situation where things actually ran off the rails and then spend the money to try and dig herself out of the situation. Martha’s comments made me think about the nature of the protection that people typically get in legal affairs.

Legal protection is largely paper based. You write protections into the paper of a contract. There is nothing about that kind of protection that stops bad things from happening, the paper simply spells out consequences if they do. If you think your rights under a contract have been breached then pursuing your legal protection for those rights involves more paper. Paper to send demand letters back and forth, and paper to file a lawsuit. Paper exchanged back and forth to ask discovery questions and provide answers. Paper motions filed to ask the court for pretrial rulings, and, if you do actually go to trial and win, ultimately a piece of paper that says someone owes you money.

Now there’s nothing inherently wrong with this kind of protection. It’s the right kind of protection for operating inside of our formal legal system. But if you’re relying on that kind of protection, it’s important to recognize that it has inherent limitations. Most importantly you have to recognize that the legal system, by and large, does not look ahead it looks back. The legal system is not about preventing problems and finding solutions when they do crop up. The legal system is designed to look back at situations where someone claims they have been harmed and do two things, assess blame and determine consequences. Along the way, as I’ve noted before, the process is very hard on relationships.

A system like this is pretty well suited for people who want to deal with others in business on a transactional, win/lose basis. But for those who put more value on the relationships, for those who are oriented towards figuring out solutions rather than fighting about whose fault something is, this system can be lacking.

In the second case with Martha, she felt a different kind of protection. I guess you could call this “people based” protection. By sitting down with her potential partner and talking about the things that were most important to them as people, the two of them identified the fact that they would not make good business partners. This protected Martha from another long protracted litigation like she experienced before. In other cases where people have completed the Conscious Contracts process, they’ve relied on the tools those contracts give them to work through problems together and come out stronger on the other side.

So when it’s time for you to go visit a lawyer to get protection for a business relationship you are building ask yourself what kind of protection you’re looking for. Is paper protection enough for what you want to do? If you’re looking to create a relationship that is sustainable, is prepared to tackle the unpredictable problems of a complex world, and creates value for everyone concerned then you need more than paper protection. You need to focus on people over paper. If you’d like to learn more about how to build people protection into your legal agreements, fill out the contact form below and ask to schedule a 30 minute discovery call to talk about Conscious Contracts.