Contracts and powers Seth’s blog

A written agreement benefits the party with minimal power.

Power can be in the form of money, access to lots of lawyers, or simply the desire to burn it to the ground.

In the moment before a contract is signed, the lower-powered party is in the moment more Power is because another entity wants what you have. But as soon as they have it, it is only the contract that provides concrete protection against future events.

Handshake agreements are great if there is an ongoing, stable interaction. As long as each side is respectful, the other side can continue what they said. But when priorities or outside factors change, an arbitrary arrangement can harm the person who can least afford it.

Two things to focus on are:

1. Is the contract specific enough that there is no doubt about who will do what even after the world changes?
2. Are the contractual remedies clear enough so that if the contract is not honored, the lower-powered party can easily and efficiently obtain a fair result?

This is why adding a binding informal arbitration clause to a contract is a smart idea. Why it makes sense to have worker and other protections in the law. And why we should strengthen and applaud judicial systems that enforce clearly defined treaties.