Before we begin this article, let us ask you one basic question.
What’s your definition of a founder? Is it someone who conceptualizes an idea, or someone who gives a fuller version to the idea?
The founders of an organization, to us, are those who bring that organization into existence. From scratch.
A search over the internet about the history of McDonald’s would bring you to Ray Kroc’s name. He was a salesman who delivered several milkshake mixers to the McDonald brothers and made McDonald’s what it is today.
Except he’s not actually the founder!
He ended up buying out Mac and Dick McDonald, the brothers from California who conceptualized and worked over the idea of McDonald’s for decades!
If you’re reading till now, you’d be intrigued to know how Ray Kroc buy out the original creators of the fast-food restaurant out of their own business!
Ray Kroc, a struggling salesman visited McDonald’s first store run by the brothers in California. At that point, only 3 food products were sold by them hamburgers, fries, and milkshakes. Their business model was super successful as the food was being served in 30 seconds in disposable packaging and was based on a take-away system.
He convinced the brothers to let him grow their business on a franchise model. He was super impressed and saw huge success in their business model. The brothers agreed and Ray started his first McDonald’s franchise in Illinois. The brothers and Ray constantly had fights over how to expand their business. While the brothers did not want to compromise on the quality standards, Ray only thought about making more money out of the business.
After consistent fights, the brothers and Ray decided to bring lawyers to the scene. Negotiations were made wherein it was decided to give the entire business control to Ray while the brothers keep the original store in California, get paid 2.7million USD and also receive 1% of all the revenues Ray would make in perpetuity.
Looked like a fair deal?
But at the last moment, the brothers were told that the 1 percent loyalty clause can not be put in the written agreement due to some ongoing negotiations with the investors. Though he gave them his verbal commitment for the same, and what we call in legal terms, the handshake deal was made.
As you would have guessed, the brothers never saw the 1% royalty. All they seem to have made was the $2.7 million (which was, by the way, the only clause in their stride mentioned in the written agreements).
By 2012, according to one estimate, that stake would have made the McDonald brothers a staggering $305 million a year!
When Ray died in 1984 at the age of 82 his personal fortune was estimated at $500 million while on one of the brother’s death in 1998 the will amounted to just $1.8 million!
You can read more about this in the book titled: Ray & Joan: The Man Who Made the McDonald’s Fortune and the Woman Who Gave It All Away.
This story has a lot of learnings. While for the entrepreneurs, it shows how not to negotiate the terms, for the lawyers it provides the biggest testimony as to why you should never let your clients get in a handshake deal!
Spend money on good contracts, it’s often worth it.
A handshake deal is a verbal commitment to a transaction. The problem with handshake deals and other oral contracts though is that it can be exceedingly difficult to prove their existence, let alone that the three necessary elements to make a contract valid were there at the time the contract was made!
Why should you get each term drafted in a contract?
- There can be disagreements over particular clauses. For example, if you think the party is going to pay up-front while the party assumes to pay in installments. Getting it in writing as a clause in a contract is the best way to solve any future conflicts!
- You never know when the other party decides to dishonor the handshake deal, no matter how close they’re to you.
- We are not robots. None can remember details. It is, therefore, better to have those minute details written in case a dispute turns up 2 years down the line.
- And last but most importantly, in case a dispute arises, it is easier to prove your points if there’s an already negotiated contract in the picture!
How can you learn contract drafting?
Contract drafting and negotiation are like learning karate or learning to play a musical instrument – the more you practice, the better you get at it.
To make sure you really get the core skills, we have created more than 100 contract drafting and negotiation exercises that are administered by our experts over 50 weeks, which enables you to form necessary brain and memory patterns to apply the knowledge in real-life situations.
Our assignments are realistic and imitate the sort of work you will get from a client or at a job. If you practice these and get detailed personal feedback, you will know what to do in specific situations at work because you have already dealt with them before in your course!
You will build your muscles by working on smaller problems and then begin to work on more complex and challenging situations.
When you walk into a real-life situation, you will be pleasantly surprised to realize at how much of it you have already tackled before through the practice exercises.
We currently have enrolments open for admission in our Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution.
This is a 12-months diploma course with 1 online live class per week, 2 practical /drafting exercises per week, printed study materials at your disposal, doubt clearance within 24 hours and a lot of other benefits that you can find on the course page with details.
How can you start? It’s simple.
Find out more about the Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution here.
We strongly recommend you to download the free material from the course page to get a sense of what we teach.
What is the career potential after doing this course?
- Knowledge of contract drafting, negotiation and dispute resolution cuts across almost all areas of legal work. If you are a master of contract drafting, you are definitely going to do very well in a legal career, no matter what is your chosen area of practice.
- Whether you want to work at law firms, in-house legal departments in companies or litigate in the court, learning contract drafting is extremely beneficial.
- There is a great opportunity to build independent practice through contract drafting. As clients begin to trust you with contracts, eventually they come back to you when they have disputes. Contract drafting has a low barrier to entry as clients trust younger and junior lawyers with drafting as opposed to disputes.
- As more Indian businesses are moving to formal from the informal sector, the demand for contract drafting, negotiation, and dispute resolution is also steadily on the rise.
- As more foreign businesses are entering India, there is a significant opportunity to cater to these businesses too.
- Contracts are becoming more enforceable thanks to better access to arbitration and especially easier money recovery proceedings through the Insolvency and Bankruptcy Code. This has significantly increased the importance of well-drafted contracts.
- You cannot learn these things by studying any particular laws, regulations or rules, and there are no adequate books that can help you here. Success in IP, media, and entertainment law practice requires skills that are more varied than merely knowing the provisions of various statutes.
You can take this course even if you have not studied contract law (or any law for that matter). Businessmen, project management and contract management professionals and other working professionals who regularly need to deal with contracts will also find this course extremely beneficial.
If you have any queries, comment below or schedule a career counseling session by calling 011-4084-5203.
Other courses open for enrolments currently till 29th February are:
EXECUTIVE CERTIFICATE COURSES