Get the "John Hancock" - Part One

Implement 2 rules today to save headache and dollars later.

Rule #1: Use a written agreement with every customer.

Regardless of whether it is a commercial or residential project, a written agreement should be utilized. Some states like Tennessee mandate usage of a written agreement for residential work and failing to do so carries steep penalties.

Yes, failing to use a written agreement can get you into hot water, but it’s also a commonsense mistake that can be fixed… now, cheaply, and without interruption to your business operations. It is one of those mistakes that is 100% avoidable. Unfortunately, when a dispute has arisen and we’re sitting in court, I hear my corporate clients say, “We usually have a signed, written agreement – we just didn’t this time.” Those outliers can cost you financially. Following a method most of the time is not sufficient. The one time you deviate from using a written agreement, a problem will erupt, and even more commonly, involving a customer who you know personally or through a friend and you’re just doing a favor by helping them. Those once-friendly encounters can get sticky quickly. Use a written agreement and obtain signatures with friends, family, fellow church members, and more every…single…time without fail. 

Rule #2: Get the customer’s John Hancock.

John Hancock is your best friend! Get the other side’s signature on the document no matter what. If you use an estimate with terms and conditions that you email to prospective clients or send via a CRM or other software, please ensure that there is an affirmative acceptance of the entire document. You want a green light to proceed, but you also want to show clear acceptance of the particular terms and conditions that you sent. Thus, a general acceptance to proceed with the work is different than an express acceptance of your entire proposal. Absent this, you likely cannot rely on your terms and conditions in court or any other setting.

If you email a proposal and the customer calls or texts giving you the green light, still get their signature. Perhaps tell them that you appreciate their call or text and are excited to proceed with the work but still need them to formally accept via the prescribed method “for your records and so their job can enter your queue.”

Additionally, you don’t want to miss out on an attorney’s fee provision. Hopefully, you have a clause in your contract that if a dispute arises out of or relating to the project or contract, you have the right to recoup your costs of collection and attorney’s fees from the other side, or at a minimum, that the prevailing party is entitled to its their fees and costs (assuming you’re on the right side of wrong in the situation).

Per the best evidence rule, a physical signature is the best acceptance of your proposal. Alternatively, if a customer is having technical issues or can’t find the link by which to accept, then they can reply to that same email that they accept.

Thus, the next best evidence would be an email saying that they accept your proposal with terms and conditions sent on a certain date, or they can accept and reference the proposal number. Having some identifier helps link their acceptance to “that document”. (I have seen a customer say that their green light was regarding something else and gotten out of T&C applying, so to avoid ambiguity or various interpretations, it is best to clarify).

Alternative to an express contract is an implied contract, but through that, you lose access to your important terms and conditions that are essential aspects to the transaction, just as important as price and scope (if not more important).

If you take a customer to court, or they initiate action putting you in the position to defend yourself or file a counterclaim, you don’t want to be held to a base level recovery. In other words, you are awarded the principal but nothing more while you’ve lost out on interest and expenses and have to pay your own way on attorney’s fees and costs.

Absent utilizing these measures of securing a signature as described, you likely will recover your principal less your legal fees and costs, which is an unnecessary deduction when one sentence in a terms and conditions sheet, confirmed in writing as accepted via a customer’s signature, can largely absolve this risk.

For example, your principal sought and owed to you by a customer is $20,000. Your cost to file suit and have the other party served is $270. If your legal fees are $3,000, then $20,000 minus $270 minus another $3,000 means you take home $16,730.

Wouldn’t you rather be awarded $23,270? ($20,000 principal plus $270 court costs and $3,000 legal fees).

That is a delta of $6,540, which is real money. I would rather that money be in your pocket or awarded to you rather than absorb it.

Call me passionate about contracts? 100%. You either have that additional money in your pocket or you don’t. If you stack up the cash, it forms a mound.

I love to win cases for my clients, but it pains me when, because of something that was already done before my involvement, you are forced to eat your fees instead of recovering them. It also pains me to try a case whereby the judge asks a confirmatory question (slightly annoyed and/or shocked at times) that there was no signed agreement. (Usually, my client is simultaneously kicking themselves).

Common responses that do NOT fly with the judge:

1)    The T&C would otherwise apply, but it was verbal.

2)    We were friends, so I didn’t use a written agreement.

3)    I did work for (insert customer’s name) before. I did use a written agreement on that job – just not this one.

4)    I sent a written proposal via email (or my CRM), and (insert customer’s name) called me and gave me the green light.

5)    I have text messages on my cell phone in my car with the customer that proves our arrangement.

In the above circumstances, you miss out. There’s no substitute for having a signed, written agreement.

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