REI Wealth Monthly Issue 05 | Page 34

12 WARNING SIGNS YOU’RE HEADED FOR A LAWSUIT WITH YOUR PARTNER JEFFREY H. LERMAN that is the person who has the most, hard dollars in the deal. If that is not possible, consider agreeing upon a neutral third party upfront, to be the tie-breaker vote and make that vote binding. If that is not possible, include a mandatory mediation clause in your agreement. #6: Previous Bad Track Record of Partner If your partner has a bad track record (failed businesses, failed partnerships), that is a warning sign that they will continue in the same path. Sure, people can change. But if you are playing the odds, the odds are that a past bad track record will repeat itself in some way, shape or form in your experience with that partner. Ask your prospective partner about their business history. If you are already “in bed” with your partner and you do not know this information, it is not too late. Ask. If you do not like what you hear, do your best to mitigate whatever risk you learn about based on their prior history on a going-forward basis. #7: Partner Has No Track Record If this venture will be the first time your partner is trying this business, odds are they will make mistakes while learning the business “on your nickel”. Their mistakes can translate into disagreements and disputes with you. Be careful. Generally, it may be better for you to let them create a positive track record before joining forces with them. #8: Not Using A Lawyer, Or Using An Inexperienced Lawyer To Handle Documentation Of The Deal If you have no written agreement, that is another major warning sign that you are walking through a minefield blindfolded and headed for disaster All too often, we see in our office, agreements that were drafted by non-lawyer clients who were trying to save a buck (on transactions involving millions of dollars no less!), or by lawyers who were outside their core area of expertise. That can, and frequently does, result in disputes arising from a defective document. Solution: Always, always, always hire a competent lawyer to draft these important documents. The investment will pay for itself many times over in the savings you will hopefully realize in not having to pay a litigator later to prosecute or defend against a lawsuit.