Where Getting Paid and Contracts Meet

Within a period of days, two contracts crossed my desk containing nearly identical terms:

“Payment will be rendered within ten (10) days of completion of the Vendor’s scope of work to the Company’s satisfaction.”

The problem is that satisfaction is an elusive state.

The person writing the checks in a good economy, flush with cash, could be positively giddy over the vendor’s performance.

That same person, experiencing cash flow problems in a tight economy, will never be satisfied.

By the literal meaning of the term, no satisfaction = no payment.

The first contract to cross my desk containing this term had been executed 5 months prior. The water was under the bridge, the horse had left the barn, the cat was out of the bag – however you want to say it, the best time to resolve this particular payment problem had long since passed.

We were left with the solution of demand letters and, ultimately, litigation to secure payment.

The second contract had not yet been signed. My client simply called asking me to it the once-over. She felt the terms “looked okay to her,” but she wanted to be sure.

With one email, we were able to secure a revision of the contract that tied payment to performance of the specifications, rather than to the customer’s state of mind. Shameless plug: The once-over did not cost my client a dime. It was covered under our Empty Hourglass Program.

The thing about deterrents is that you never know how useful they are until there’s a problem.

The deployment of a weapon’s system preceding a decade of peace will be seen by its detractors as an extravagant waste of money. “We never even had to fire the damn thing!” would be the rallying cry.

Who knows, of course, whether the enemy would have streamed across the border had the system not been there.

The same goes with contracts.

With the right contract, the right project and the right people on the other side, no more than a handshake would be necessary. You would never know whether taking the time for that once-over was worth it.

The client with the first contract, though, he knows. Only far too late.

Eliot Wagonheim shares business insights that help companies stay on course. Get our latest blog posts sent right to your inbox. Subscribe using the sign up form to the left of this post.

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