Handshake agreements are great; still, get it in writing.
If the other side insists on legalese, I’ll do it, because often there’s no other choice. I usually take it as a sign that they’ll screw me if they can. Legalese scares me. In legalese, “No” might mean “Yes.” And it’s legal! For more on what makes contracts valid check out Legal Lad’s episode on this very topic.
Do You Need Contracts When Dealing with Friends and Family?
One special case is loaning money to a friend or family member. Consider it a gift. If they repay it, great. If not, don’t sweat it. Playing collection agent can destroy a relationship. If they miss a payment but take a holiday in the south of France, you’ll want to quiz them on why they didn’t skip the holiday and repay the loan instead.
I loaned my friend money at bargain basement rates. After he was four years behind on his payments, he sent a proposed repayment schedule. But he forgot to erase the part of the spreadsheet showing he was repaying his parents at twice the interest rate he was paying me. Knowing he was essentially funneling my stalled loan to his parents didn’t cement our friendship.
There are now services like Virgin Money that will let you loan money to friends. You register the loan with Virgin and they administer it, track payments, and enforce missed payments. You still authorize evicting your niece from that lovely SoHo loft you bought for her, but they’re the ones who send the nasty letter. Your relationship preserved, you and she can still chat at dinner, as you give her handy tips for successful dumpster diving.
Work Less, Do More, and have a Great Life!
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