If you can’t enforce a contract, your contract is meaningless.
I have a friend who woke up the other night in his apartment with a bat in his room. He tried to get it out. After chasing it around for 20 minutes, it flew behind a curtain. He looked, but couldn’t find it. Maybe it went back into some crack in the wall of his apartment.
He got nervous. After looking up info about bats, and saw that bats often carry rabies—and sometimes the bite is so small it visible.
He decided the best thing was to get a rabies shot. Unlike other diseases, rabies kills 99.9999% of people who have ever gotten it. You can’t mess around with it.
This cost him around $9,000. His insurance wouldn’t cover it.
Apparently, not dying of rabies is an elective procedure.
Cost of Enforcement
I suggested small claims court to him. Unfortunately, that’s limited to $6,000 and below where he lives.
If the cost to enforce a contract is more than what you’re fighting to get, the most ecnmc move (in the short term) is to not fight it.
How do you deal with that?
How to Enforce
Accept the possibility of disputes
No one is immune. Almost every business owner I know has a legal dispute at some point, even if it isn’t a full-blown court case.
Accept the inevitability of this.
It’s a known reality in the startup and tech world.
Contract enforcement is part of the cost of doing business, so add in margin for this over time. It is simply an operating cost.
God forbid an employee steals your IP and you don’t have the discretionary cash to prevent them from stealing your customers, too.
Arbitration Agreement, if possible
An easy out that everyone should consider. This preserves the ability for either party to dispute the terms, but also not use the courts as a weapon.
Threats of a suit are a lot less powerful when you already know the cost, timeline, and terms of the dispute ahead of time. It keeps everyone way more honest.
There’s a reason it’s such a popular contract clause.
Trust Your Gut
If someone seems sketchy, trust your gut.
It’s really that simple.
You’ll learn over time to do this if you aren’t already, because things will go wrong when you ignore intuition.
Unconventional Enforcement Tactics
I am not recommending these. I am simply making you aware of what is already out there.
- Lawfare: lawsuits and other legal action motivated by the desire to frustrate or punish behavior totally separate from what the suit contains.
E.g. filing an unwinnable lawsuit in order to create legal costs for you to defend it. - Social pressure: common sense, but if you don’t like someone, then convincing others to not like them is a way to exert pressure.
E.g. “I’m kicking you out of the business chamber if you go with the out-of-towner’s supplier.” - Blackmail: strongly opposed to this, but it’s very real. It’s the more intense version of “social pressure.” It doesn’t even have to apply to you. A family member, a company secret, or even an untrue (but believable or damaging) rumor is enough to apply pressure. It’s the same
- Upsell: the carrot instead of the stick. Paradoxically, offering someone favors for not harming you. This is only temporary, so it only works if you’re able to take away the favor at any time, or whatever someone is threatening you with is itself .
E.g. Two politicians are in a race. One is definitely not going to win, but will split votes and threaten the other. They are promised a position in the new regime if they drop out and endorse.
It all boils down to carrots or sticks, and direct vs indirect action. Indirect benefits (meeting celebrities, exclusive business deals), direct threats (“I am suing you for these 10 minor violations unless you indemnify me of this one big violation”) all play together.
It’s a tough environment out there. Prioritize partners who will not act like this. Be prepared for those who do.
