DO WE REALLY NEED TO PUT THAT IN WRITING ?
One of my most memorable trials was a breach of contract case that I litigated almost ten years ago . Here I was this young , hungry lawyer , ready to go to battle against two Ivy league litigators with our Indian clients in tow . The case was not memorable because my client eventually won , but because of the circus like atmosphere that ensued since most of the business dealings were not in writing . The main piece of evidence the lawyers had to rely on were a few scribbled down promises signed by all the partners at the local temple . The hope was that since the “ contract / partnership agreement ” was signed at a holy place , that , in and of itself , would keep all the partners honest . Of course , a year later the partnership fell apart , no one knew who owned what , lawyers got involved , and the rest was typical litigation history .
YES . YOU REALLY NEED TO PUT IT IN WRITING . There is an old British saying : “ Penny wise and pound foolish .” In the business world , we use that term often . It is foolish to save money on initial company formation documents , and then have to pay ten times that amount in legal costs when the business starts to experience problems .
In most situations , to raise enough capital to buy a hotel , gas station , or farm , a group of partners must pool together their financial resources . However , often the value each partner brings into the business is never formally agreed upon . One of the most important of these values is sweat equity . The biggest argument our law firm sees in a new partnership , is the partner that is grinding away at the hotel or store everyday usually will argue that the increase in business value was based on their sweat equity . On the flip side , the other partners will argue that based on their higher initial investment , they are the reason
16 | TIBO Magazine - Winter 2017 the partnership could buy the business in the first place . If these tough conversations are formalized in a proper partnership agreement from the very beginning , many friendships , family relationships , and partnerships could be salvaged .
ATTORNEYS ’ FEE CLAUSES Since most Indians have the “ all or nothing ” mentality , we find that it is vital that all agreements have a fee shifting provision . In contracts , often there is a clause that states , “ In the event of a lawsuit , the prevailing party ( the winner ) can recover its attorneys ’
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