By Ryan Bradley, Civil Litigation Attorney at Koester & Bradley, LLP and Business Consultant at White River Consulting, LLC.
Most entrepreneurs have come to the conclusion that it is always a good idea to dedicate business-related communications to writing. But is it always like this?
When it comes to writing it, think about two buckets: “Get it in writing” and “Have a conversation.”
Get it in writing
This includes contracts, real estate purchases, long-term agreements and some employment contracts.
Many successful founders love to brag about how they make deals based on a handshake. This method is reckless and rarely leads to a smooth agreement. No matter how sincere the parties to an agreement may be, executing a written contract is important to provide clarity as well as protection.
The general rule is that both oral and written contracts are enforceable. The main exception to the rule is that in almost every case, contracts for the sale or transfer of property must be in writing. This is known as the statute of frauds and applies in other cases as well, especially to contracts that last more than one year. Application of this rule is standard in almost every state. This means that many situations can lead to binding oral contracts, such as employment contracts, agreements to purchase goods and services, and consultancy contracts.
In addition, states such as Illinois have modified the rules regarding limited liability companies to allow oral agreements between business partners to be valid and eliminate the need for a written Operating Agreement. This decision was made to incentivize founders to set up businesses in Illinois and drive revenue to the state – not to protect and insure people starting a business.
While eliminating a writing requirement may sound great, particularly for business people concerned with maintaining speed, the reality is that verbal contracts rarely lead to success and generally lead to litigation. There are almost no situations in the real world where an agreement between individuals in a business contract should not be limited to writing. By submitting written agreements, even if not required by law, the vast majority of misunderstandings that lead to costly litigation can be avoided.
Employment contracts are a special case. Many states are known as “at-will” employment states. Illinois is a perfect example. This means that workers can be hired and fired with little or no recourse other than the protections established by the unemployment insurance system. As a result, many founders are forced with a decision to formally hire an employee or make efforts to retain the employee as an independent contractor. While these options come with a certain set of legal pitfalls and advantages, in general, committing an employment arrangement to written protection protects the employee more than the employer in at-will situations.
If, however, a company hires an enterprise-level employee or a highly skilled individual, an employment contract is necessary. The employment contract may define at least the duration of employment, but also define a reasonable confidentiality agreement as well as a non-competition agreement. Such agreements should also always be limited to writing.
Have a face-to-face conversation
These include internal communications and strategy discussions.
While business agreements and contracts are committed to writing, some communications should almost never be committed to writing. A great question to ask yourself before writing anything is whether you would care if the writing was shown to a jury or judge in the courtroom.
Eliminating a paper trail isn’t dishonest, it’s just smart. As recently as January 2019, email and text communications between individuals in Donald Trump’s presidential campaign were investigated and ultimately led to federal charges that are still pending as of this writing..
While most entrepreneurs and founders are not at risk of being accused via text or email, it is vital to understand that there are certain communications that should never be emailed or sent in any kind of written form. The basic rule of thumb that I tell senior management is that if you don’t want everyone in your organization or New York Times to read what you write, go ahead and make a phone call or have a face-to-face meeting.
Additionally, if a founder, business owner, or executive wishes to have a conversation about a current employee, whether to evaluate performance or follow up on rumors or office gossip, a face-to-face conversation is always a good idea, too. After all, you can always make notes about your conversation later, but you can never “delete” what is written and sent.
There’s almost no such thing as completely secure communication these days, and it’s often better to have preliminary conversations face-to-face or on a secure phone line than to write them down in Slack, a text, or an email. This is true even if you have absolutely nothing to hide and use end-to-end encryption.
A quick note about the notes
Note taking is a key part of any operation. It is vital that you have a memory of what you have done and what you are committed to doing. That said, use discretion when allowing your personal or even business notes to be held electronically. It’s much harder to keep something personal when it goes digital.
Write this down
At the end of the day, we all do business in an unforgiving world. It is up to every founder and business owner to use their personal writings to their advantage and prevent those same writings from being used against them. Keep this in mind the next time you forward a joke or remark about a colleague via text.