Forget the handshake – cater for the divorce

This post was written by Shirley Fodor during her time as a partner at Jacobson Attorneys

Not so long ago, a person was really as good as their word- or handshake. Agreements were struck and adhered to simply because one’s reputation within the business world, or any other sphere, was at stake. It was known and understood that people had relative freedom to enter into and perform agreements as long as the means and the result of that particular agreement were lawful. It was for precisely this reason that the law (and the respective governments worldwide) sought not to interfere in the freedom of its peoples in the entering into and adhering to the terms of their agreements. In fact in South Africa, only two forms of agreement have historically had to be in writing and signed – a credit agreement and a sale of immovable property.

The times however are changing: people are becoming ever more aware of their perceived rights and with this change in perception comes increased litigation. We are not for a moment suggesting that business associates cannot and should not be trusted. However, how certain can you really be that you have all understood the same thing? Are you absolutely sure that what your co-contractant said is what he/she actually meant? What happens if two or three years later a dispute emerges and none of the original contracting parties are available to provide any insight into the transaction? This is particularly so when there is no one else to witness the transaction in question.

So how does one safeguard against “I said, you said” type disputes developing before the courts and the various other dispute resolution fora that have emerged in recent times? The answer is quite simple- at the start of a relationship, and by this we mean any relationship, while basking in the warm glow of all the benefits that may be achievable- cater for the divorce.

We are continuously surprised by how many of our client’s come to see us because of a transaction that has gone sour, where the transaction is not embodied in any written document. Frequently such transactions are several years old and the people who were actually involved are no longer available to fill in the information gaps, leaving everyone in something of an invidious position. A problem which could be easily solved if at the time the transaction was entered into, the intended objectives and consequences for failure had been embodied in a written agreement – an agreement which the law says is evidence of the arrangements between the parties – and that is exactly the evidence we need to protect your interests.

There is of course much to be said for a properly drafted agreement. We are again frequently surprised by the number of clients who are willing to pour money into litigation, but not into the preparation and negotiation of detailed agreements.

As set out above, agreements are evidence of what the parties intended at the time they entered into an agreement. As such, it is highly advisable to include as much detail as possible in respect of not only what the parties wish to achieve by their agreement but what the consequences for failing to achieve these objectives within a stated (or reasonably determinable) period of time will be. By leaving as little as possible to chance, the parties themselves foreclose the possible areas of dispute, and thereby reduce the risks of litigation.

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