I read with interest this post–written by Julian Ee–on how he was screwed all over due to a lack of contract. In a gist: Basically Julian felt that the founders of the startup he was working for did not honour their initial agreement to give him “shareholder’s benefits” in exchange for his hard work as the CTO, so he took to the court of public opinion to air his grievances. This is because he couldn’t really air his opinions in the court of law, since there was no legal basis in Malaysia due to no written contract.
I’d always felt very strongly about contracts to write my own version about the perils of NOT having one, and the related clauses to take note of depending on your position. Indeed it was painful to read Julian’s account because it reminded myself of what happened in the past in Finland–something so painful and traumatic that I would not want to mention again.
However, I completely empathise with Julian, so I want to write this piece for him to move on well. So here are 3 reasons why you should not start work without a written contract–no matter what position you are in: student/ freelancer/ working for a start-up. I also want to urge all business owners to offer their employees/ freelancers contracts, to protect their own rights as employers. This is intuitive for a contract protects both parties and clarifies expectations. The way I see it, because Julian has gone public, the founders of GrabGas are effectively screwed due to loss of public confidence. In addition, because they have funding and are accountable to investors, they are even more screwed than before they hired Julian.
Reason #1: The more emotionally-attached you are to a person, the more you should sign a contract whenever money is involved.
Yesterday I was at EARS.asia–this awesome European-Asian networking conference in Helsinki–really early in the morning. Because a simple breakfast was served, I was spamming coffee alone at one corner and checking out the schedule when this nice gentleman Mr. S.K Lee from KT Licensing joined me to check the day’s schedule.
I happily said “Hi!” To SK because I really loved his informative talk the day before about IP and licensing issues, and things to take note in Asia! Prior to that I didn’t even know China signed the agreement under the Berne’s Convention–aka copyright is “automatic” even in China–and so we started talking about trademarks, copyrights, law enforcement and contracts.
SK gave this really, really wise definition of a written “contract”:
“A written contract is a summary of what had been discussed and agreed upon beforehand.”
I really loved this definition because it frames a contract in a trust-based, communicative context. This is as opposed to a hostile context where you sign contracts in case you need to go to court. This supports once again the notion of contracts as first and foremost a communicative tool, and next the last resort for lawsuits.
SK was also generously sharing about scenarios where people feel cheated and defrauded because they feel that sales people have not been upfront with them. Therefore, he always made it a point to communicate the pros and cons of the licensing deals to his clients because he values trust above everything else, for a long-term working relationship.
I’m even starting to think of things this way: That perhaps it is more useful to separate the concept of “contracts” from “trust”. Instead, we should perhaps associate “contracts” as simply “a summary of what had been discussed and agreed upon beforehand”. It’s really nothing about trust–it’s more about an agreement of the summary.
Agreement and permission by all parties is key. Against this context, trust is the result of the contract being followed.
Therefore, the logical conclusion is that the more you trust a person, the MORE you should sign a contract with them, because communication is not easy at all! People have different assumptions all the time, plus egos and delusions of grandeur stand in the way of effective communication. In addition, human beings being human are rarely rational but emotional.
Reason #2: “The road to hell is paved with good intentions”.
Do you for one moment believe that the founders of GrabGas and Julian started out their journey with the intention of the situation progressing to what it is today?
The answer is of course a resounding “No”. This brings me to the next point that “the road to hell is paved with good intentions”.
For one, people do not sign contracts with each other, instead preferring to rely on so-called “verbal contracts”. But what if a “verbal contract” to one is seen as “a casual discussion” to the other party?
That would be totally fucked up LOL.
This brings me back to reason #1 again of SK’s definition of the written contract–“a summary of what had been discussed and agreed upon beforehand.”
Such a definition is incredibly kind, instructive and designed to bring out the best in human beings. This is because if anything were to cock up along the way, both parties can always return to what is written, unambiguous and clear in intentions.
So, always sign a written contract, but before that, always take your time to discuss the terms of the contract. 🙂 Remember to think about all sorts of scenarios that can happen, and also clarify expectations. Things can change along the way, but do bear in mind to re-discuss and renegotiate!
Reason #3: Business is pretty much also about ego.
The thing is, marketers and business development managers (aka sales folks) tend to think that the start-up cannot make it without them, because they bring in revenue. Tech guys think that an app company/ digital startup cannot make it without them because they create the actual product that consumers use.
So you see, marketers, techies and others are needed in a team. To what extent they are replaceable is another question. To what extent each team/ individual radically improves the valuation of the business is yet another function of subjective opinions. It’s essentially a question of once again, unambiguous agreement. If people don’t agree, they should not start work!! It does not make sense to start work and then return to bite the hand that feeds you, in the context of unambiguous agreement at best achieved via a written contract.
Therefore, this GrabGas incident seems to be truly unfortunate because people do not know the standard protocol and agreement involving all parties. I’m here saying that perhaps the masses should not be so harsh in their critique of them, because to be honest, there is no written agreement! It’s a case of he-said-she-said, and honestly I believe that this situation is new to everyone.
In cases involving experienced businessmen however, then it would be a different situation altogether, because experienced businessmen should know better.
A lack of contract on the employer’s part therefore, reveals inexperience. It exposes many of their assumptions about human beings, ego and (mis-)communication.
Julian: I wrote this for you. I feel your pain and this feeling of being made used of and discarded due to a lack of written contract and this stinky feeling of being ripped off.
Sincerely, from the bottom of my heart, I hope you move on well. You write so eloquently and you code so well, I’m sure the future ahead of you is bright! Obviously, scars take damn long to heal, but this episode for us would inevitably make us wiser and stronger as human beings. 🙂