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The worst advice Iíve heard about contracts
by Zachary Strebeck on 02/13/14 04:19:00 am   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutraís community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

 

While reading the forums on Board Game Geek the other day, one poster relayed the following piece of advice. “Someone told me once that if you have to have a contract with someone, then you shouldnt [sic] do business with them,” he wrote.

This is probably the worst advice that I’ve heard regarding whether or not to have a contract.

Well, I am here to say that this is probably the worst advice that I’ve heard regarding whether or not to have a contract. It’s not a coincidence that the mantra of many businesspersons over the centuries has been to “get it in writing.” There are many reasons for this. What follow are just a few.

“Don’t you trust me? You have my word.”

While oral contracts can be valid and enforceable, they can present a lot of problems. First, something known as the Statute of Frauds prevents certain types of contracts from being enforceable if not in writing. These include contracts that can’t be performed in less than a year (such as a multi-year licensing deal without a termination clause) or sales of goods for over $500. Second, should things go wrong with the deal, it becomes your word against theirs. This presents serious evidentiary issues in the event of a trial.

“We are friends – why would we fight over a little business deal?”

Getting into business with someone that you know on a personal level may seem like a good idea. After all, you are friends, and would never screw each other over, right? Well, no one knows the future. Friendships, like business ventures, encounter bumps and other problems all the time. Having an agreement beforehand that outlines what will happen should things go wrong can be a huge benefit. While it may tug on the emotions, similar to a prenuptial agreement, it is better to have than not have.

“Looks like we’ve come to an understanding – it’s a deal!”

Ensuring that all of the terms of the deal are crystal clear in a written contract can be a huge determining factor in how smoothly the deal goes down. Recently, in another Board Game Geek forum thread, one poster was looking for advice on whether the definition of “sale” in the contract a friend had signed meant pre- or post-Kickstarter.

This just highlights the importance of not only having a contract (otherwise you run into the “your word versus mine” problem again), but having the contract written without ambiguity and covering all bases. This is one of the benefits of having an attorney; their job is to assume that everything will go wrong and plan accordingly.

…Having a contract does not automatically mean that you do not trust the other party.

I’d like to point out that having a contract does not automatically mean that you do not trust the other party. The third reason above should illustrate the fact that, even though two parties trust one another, they could simply have a misunderstanding as to the terms of the arrangement. So, remember to think ahead and get your next deal in writing. If you need assistance, feel free to contact an attorney.


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Comments


Ian Richard
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I saw that post and I agree completely. I don't like to do business without payment up front and/or a written and signed contract.

This isn't about trust, but about protecting BOTH parties. Taking the time to write and review a contract ensures that both parties know what is expected of them. The more details we have in writing... the less chance that someone will be shocked or upset by the business.

Although I will say "If I don't need a contract with someone... I probably don't want to do business with them" because crap happens in business and I hate to get into fights with people I trust. It doesn't matter who is correct because it's a Lose/Lose situation.

Zachary Strebeck
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Yes, doing business with family and friends (especially taking money from them) can be a recipe for disaster. Better to keep things at arm's length, and keep that important piece of paper between you. Too many things can go wrong, even when it's out of your control. Don't want that getting in the middle of an otherwise good relationship.

Ian Hamblin
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Totally agree. Nodoby knows what will happen down the road. Contracts make sure everything stays fair for everyone involved.

One question I have though, is there a place that a brand new team with no budget can get a contract? I'm guessing not, but if not, should there be? I realise I am probably being very naive with that question.

Kujel s
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There is no answer without the question. As for the an answer to your question I unfortunately do not have an answer but someone else in this community very likely does.

Ian Richard
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I don't know if this is the best answer, but it's all I've got. You'll write your own contract.

First, look into your circle of friends or ask online for horror stories and pitfalls people have encountered. It's easy to forget things like "Can the artist resell the work he made for me in the future or is this exclusive?" or "How long is a 'reasonable' time frame.' If someone pulls out of the contract, who keeps the rights?

Second, put hard numbers on EVERYTHING.
" This milestone with these deliverable are due by this exact day. Payment will be received no longer than X months from delivery. The consumer may return this deliverable for up to X revisions. Should either party miss a deliverable date the other party has the option to void this contract and all rights return to their original owner."

Usually, all the details won't be needed... but you want them their in case it goes sour. Writing will protect everyone.

Travis Jones
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To back up what Ian R. says above... yes, you write your own contract. You essentially would anyway, even if you had the money for a lawyer.

If you're concerned on where to start, there are templates and examples you can refer to online, so just try to search for some. If worse comes to worse, maybe contact a local law school to see if you can get an example from one of the instructors or students. They might also be able to give you a sanity check without cost - never hurts to ask.

Make a list of your biggest concerns and have the other parties that would be bound by the contract do the same. Be sure that all of these concerns are addressed in the contract in as detailed a manner as you can make them.

Ian R. also gives good advice to ask or search around for common pitfalls and problems. There are likely things you haven't even thought to be concerned about, especially if this is the first time you've made a contract.

Zachary Strebeck
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While many attorneys require a retainer or some other up-front fee, some (myself included) may be open to different payment plans that can get you started with your agreements in exchange for later fees.

I would caution against using a template from the Internet, only because many of those are not specifically tailored to 1) your individual situation and 2) the game industry specifically. But there is nothing legally stopping you from writing your own contract with whoever you are working with, I suppose.

Kenneth Blaney
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"You'll be best friends until you are successful" - my lawyer's words describing why an operating agreement is a really good idea.

Jonathan Murphy
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Trust is earned. Create a basic contract that protects the employees and owner(s). Learn your staff, and let your staff learn you. Then create new, more in depth, flexible contracts later.

If you can't pay initially then don't work staff until you get funding. You can talk things over, and poke out ideas in the meantime. Make sure you honor your intention of paying them something later, to match even the smallest contribution. If you are evil, hire saints. They aren't greedy!

Ashkan Saeedi Mazdeh
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It's really risky to work without contracts with people you don't know and you should almost always have upfront payments but there are people which you can work with them without contracts.
We work with our awesome friends at MuchDifferent for a long time without anything written or as some of us tell, any bullshit papers but these situations are rare and anyone (us included) should understand it.
MuchDifferent and our NoOp Army teams have very similar philosophies and MD is a none profit and we have a similar concept in mind. None of us has no love for piling money up and it's clear in our life styles and businesses but even us don't do it with others. The other thing is that we are in super close connection, we are technically good enough to understand what we want from each other and even we can be called part of MuchDifferent.

Having clear contracts is really important. We had a customer which thought (or at least said that thinks) adding features at the end which take 15% of the development time in addtion to the 3 months which we agreed at first is a part of polishing. When i described polishing or going gold is moving from alpha to a damn clean thing he freaked out somehow. Stay anything CLEARLY when the contract is fixed on budget.
Especially in smaller contracts which the product owner might not know a lot about your industry, it's damn important. Think of a man which wants to put $10k to make a game and sell on Google Play or a university guy which wants an app for their university to allow student to browse the university in a virtual way. They might not know what makes a beta different from an alpha or why you can not make sure why it doesn't work on all devices if you want X and Y features always available.

Zachary Strebeck
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Great advice (not the part about not having a contract, though). All of this stuff needs to be spelled out to the letter, especially, as you say, when they do not necessarily understand the games industry. This is why, I think, there could be issues with equity crowdfunding in games, if a new army of small-time shareholders begins to use their collective voting power to micromanage. I think the Kickstarter model is where we will stay for the time being, and I think that is a great way to get the up-front funding to get your agreements in order. I'm trying to work up a package of services and forms that will help jumpstart a crowdfunded project without extensive legal fees. Is there any interest in something like that?

Jason Bentley
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I've probably re-posted this link a dozen times in the last couple years; it matches your points in a lot areas.

Mike Monteiro - "Fuck you pay me"
http://www.youtube.com/watch?v=6h3RJhoqgK8


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