Probably every person involved in running a business has desperately wished, at one time or another, that he or she could have the chance to rewrite a carelessly written letter or take back a thoughtlessly worded statement that has become the focus of another person's claims and demands, coupled with the threat of legal action. Typically, the aggrieved party to the untidy communication has recorded in his memory a promise, assurance or representation of something that has caused him to alter his position or suffer some detriment in anticipation of fulfillment.
The initial responses to the aggrieved party's claims are quite predictable: "He knows that I never intended that!" "Yeah, I said that, but I was only presenting a vision of the possibilities, not making any guarantees." "My assurance that he would get (stock) (equity) (an exclusive territory) (a raise) (a promotion) (a bonus) (a job) etc. was clearly understood to be dependent on (sales) (performance) (meeting budget) (obtaining financing) etc."There are two settings in which these careless promises, assurances and representations usually are made:
1. A time of unguarded optimism regarding the future prosperity of a new enterprise. Impulsive motivational promises about "sharing the wealth,' "owning a piece of the rock," "bonuses that will be paid," etc. are quite often made to employees, business associates and others in the rapture of early optimism about the imminent success of the venture. Management later sadly discovers that despite the commitment and hard work of these individuals, it simply cannot in good faith afford to follow through on its promises.
2. A time of crisis in the venture when a vitally important need momentarily eclipses restrained business judgment. Overstated assurances of performance, understated projections of the probability of failure, unrealistic promises of compensation or participation in profits and other similarly risky statements are often carelessly made to allay the fears and win the cooperation and support of essential money sources, business allies and key players. When the crisis is over, however, the clear perspective of hindsight often reveals that the contributions of certain participants, once thought essential to the venture, have fallen far short of representations or expectations and are not considered worth the promised equity or compensation. Other individuals, without the promisor's full realization, may have risked money or suffered detrimental changes in their financial or business positions in good faith reliance on slap-dash projections, representations or assurances.
Anyone engaged in any type of business communication should follow five fundamental rules for avoiding misunderstandings and unintended misguided reliance by others:
1. Examine the motive for making any promise, assurance or representation. Unless a promise, assurance or representation is absolutely necessary to secure another party's contribution that is essential to the business, simply do not make any commitment. Exercise restraint. Do not allow fear, anxiety, gratitude or the momentary euphoria of success cloud good judgment.
2. Be prepared to keep the commitment. Do not allow yourself to make any kind of promise or representation unless you have carefully confirmed your ability to follow through under any set of circumstances.
3. Preplan your communication. Outline in writing each of the points you wish to communicate and the objectives you desire to achieve, whether the communication will be written or oral. Identify key words that communicate accurately. Avoid casual or vague terms that are subject to different interpretations.
4. If the communication is not initially in writing, be sure to confirm it in writing. Always (without exception) confirm in writing every communication that contains any promise, assurance or representation and retain a copy of the confirming letter in your files. When you hang up the phone or return from a meeting in which the conversation occurred, write or dictate a letter setting forth an accurate summary of the conversation, ending with the sentence: "Please let me know if I have inaccurately summarized our conversation." It is a good idea to take notes during important conversations from which a written summary can easily be transcribed.
5. Have your lawyer or someone else proofread the written communication. It is always a good idea to have an independent party, preferably your lawyer, read the written communication to detect any ambiguities and verify that the intended message comes across. Always review with your lawyer any communication, written or oral, that is contractual in nature. Avoiding the minor expense of legal review by your lawyer is never worth the risk.
Following these rules forces one to exercise restraint, discipline and good judgment. Far too often, the virtue of a precise, carefully documented business communication is learned only after thousands of dollars are spent on legal fees and settlement costs, or perhaps a judgment after trial, to resolve a dispute that could have been avoided with a 15 minute review by a lawyer of a one-page letter bearing a 25-cent postage stamp.