Agreements That Work

ISBN 978-976-649-089-8
WWW. IDEAS THAT CAN CHANGE YOUR LIFE . COM
AGREEMENTS
THAT WORK
Conditions of a Great Contract
JAMES SKINNER
MARK VICTOR HANSEN
ROICE KRUEGER
ww w. i d e asth atc anch an gey our lif e.co m Id e as T h at C an Ch an ge Yo u r Li fe ™ in L aw
Agreements that Work

Conditions of a Great Contract
James Skinner, Roice Krueger, and Mark Victor Hansen
“Agreements that Work” will help you to make

better contracts; and in business, everything is
based on contracts.
___________________________________________
Give this book to anyone you know who is involved
in business. It will save them much grief in the
years to come.
www.ideasthatcanchangeyourlife.com/gift
___________________________________________
© 2007, James Skinner, Roice Krueger, and Mark Victor Hansen. All rights reserved. 1
The Authors
JAMES SKINNER is the founder of two global financial
groups that manage billions of dollars of assets. He is
also recognized as one of the world’s foremost business
thinkers and appears regularly on Japanese television.
ROICE KRUEGER co-founded Franklin Covey, the

world’s largest training company, and has supervised
consulting projects for 80 percent of the Fortune 500.
MARK VICTOR HANSEN is the co-creator of the Chicken

Soup for the Soul empire and is the best-selling nonfiction
author of all time. His goal is to make the planet work
for all humanity!
NOTE: Ideas That Can Change Your Life™ is a

collaboration of three of the world’s most amazing
authors, speakers, and thinkers. The first person “I” may
refer to any of the authors.
To contact the authors for keynote and other

speaking engagements:
www.ideasthatcanchangeyourlife.com/speakers
Agreements That Work

Much of our life is governed by contracts and
agreements with other people.
A legal contract is basically a “meeting of the

minds,” meaning anything that two parties agree to.
In most cases, such as when you make a purchase at

the supermarket, the contract does not need to be in
writing and may not even be verbalized at all; but if the
agreement is at all complicated or if it relates to any
important subject matter, having it in writing will make
it easier to understand and will allow both sides to verify
what was actually agreed upon should any disagreement
arise.
It is important to remember that in many if not

most instances, litigation involving contracts takes place
between people who were not even there when the
original contract was formed!
For examples, someone may sue an estate based on

a contract that the deceased entered into when he was
alive, or disputes may arise between two companies

regarding a contract that was negotiated by employees
who no longer work there.
Many contract disputes are argued by people

who were not present when the agreement was
concluded!
This book is not intended to be a substitute for

competent and professional legal advice, and of course
requirements will vary from place to place based upon
prevailing local laws and regulations.
Having said this, however, after years and years of

negotiating and concluding contracts in business, we
would like to share with you a few of the key elements
that you should look at in concluding any agreement.
While the list is not exhaustive—and indeed, given

the variety of agreements that are entered into every day,
there is no way that it could be—it should get you
thinking about ways to improve your agreements and
make them less ambiguous and thus less likely to end in

conflict or dispute.
The Agreement
A good contract or agreement should state what the
parties have actually agreed to! Never be shy about
insisting that anything you believe to be a part of the
agreement is actually stated in the contract. If you are
actually agreeing to something, then nobody should
object to it being spelled out in black and white.
Because a contract is an agreement it needs to

actually state what is being agreed to!
Background
A good contract or agreement will clearly state the
background that has led the parties to enter into the
agreement with each other.
This could be as simple as “Contractor is in the

business of providing editing services, and Ideas That
Can Change Your Life desires to hire Contractor to
provide editing services for its books”; or it may be

more involved if required.
Definitions
Any terms to be used in the agreement should be
properly defined, including such things as business days,
currency to be used, and so on.
Other Structural Issues

Where possible, those elements of the contract that are
subject to change and amendment should be structured
as attachments and schedules at the end. It is amazing
how much time and energy this saves in the long run!
Division of Responsibility
The contract should clearly spell out the division of
responsibilities between the parties, flow of operations,
deadlines, methods of payment, and other tasks that
must be performed to actually implement and carry out
the agreement.
Completeness
Every contract or agreement should include a
“completeness clause” stating that the contract or
agreement represents the full agreement between the
parties and replaces or extinguishes all previous
agreements, discussions, and negotiations relating to the
subject matter at hand.
If there is any previous agreement that is intended to

survive the creation of a new agreement, it should be
noted and spelled out.
Authorities
Many contracts require resolutions of Boards of
Directors or other authorities to be valid.
If such are required, then the parties to the

agreement should certify and warrant that such
authorities have been obtained; and where possible,
copies of the resolutions should be procured and
attached to the agreement.
Legality
The contents of the contract or agreement must be legal
and in compliance with government regulations.
It goes without saying that a contract that violates

the law may not exist in the eyes of the law and could
subject both parties to prosecution or other penalties.
A contract to violate the law does not exist in

the eyes of the law.
Check that the terms of the contract are legal in the

jurisdiction where they are entered into and where they
will be carried out.
Required Clauses
Any terms, conditions, or clauses that are legally
required to be disclosed must be included, such as
privacy policies, cooling-off periods, and the like.
Severability
Because a contract to violate the law does not exist in
the eyes of the law, it is important to include a
“severability clause” that allows any provisions of the

agreement that may be found to be in violation of any
law, statute, or government regulation to be removed
(severed) from the agreement without affecting or
impairing the rest of the agreement.
This is important because unscrupulous persons

may intentionally include language that violates some
obscure statute in order to be able to void the entire
agreement at a later point in time. It is also important
because laws and regulations change; you do not want to
have to renegotiate your agreements simply because of
some minor regulatory change.
Licenses and Permits

It should be verified that the parties have the necessary
licenses and permits required to enter into and carry out
the agreement; and if possible, copies should be secured
and attached to the agreement.
Relationship
Every agreement should clearly spell out the relationship
that is being created between the parties, such as
employment, independent distributor, licensee and

licensor, service provider, contractor, etc.
Entering into agreements and contracts creates

relationships that did not exist before, and it is vital that
the nature of those relationships be clearly defined.
Entering into contracts usually entails creating

a new relationship between the parties. Make sure
the nature of that relationship is clearly stated.
Denial of Agency
The contract should deny the creation of any agency (a
relationship where one party is authorized to act on
behalf of another to enter into contracts or otherwise
create a legal relationship with a third party) between the
parties, unless it is the intent to create an agency, such as
when one of the parties gives the other power of
attorney to perform some action on their behalf.
If an agency is to be created or a power of attorney

is to be granted, then the scope of that agency should be
very clearly defined and limited to prevent the other
party from entering into any agreements on your behalf

that you had not contemplated.
Assignment
The contract should specify whether any of the rights or
responsibilities of the contract may be assigned to other
parties.
It is particularly important for businesses to ensure

that their contracts may be assigned to any party that
may purchase all or part of their business in the future.
Scope of Liability
A good contract should clearly state the scope of
responsibility and liability for any failure to perform
under the agreement.
It is highly desirable that limits or ceilings be placed

on the amount that each party may be liable for in case
of a failure of performance. You do not want to be in a
position of being sued for damages that you did not
envision or that are larger than the amount the contract
was worth to you in the first place!
It is highly desirable that your agreements limit

the scope of any liability you may incur for non-
performance.
Compliance
The responsibility for reporting and other legal
compliance should be clearly spelled out, including
which of the parties is to actually undertake the
responsibility in each instance.
Audits
Where appropriate, contracts should provide for the
right to audit and verify the other party’s accounts. This
is especially important in licensing arrangements in
which the revenue you receive is based on the other
party’s sales.
Confidentiality
Contracts and agreements should be clear to specify any
confidentiality requirements, including whether the
terms and conditions of the contract or agreement itself
are to remain confidential.
How will confidential information be identified?

What safeguards will the parties put in place to ensure
that confidential information is protected?
Jurisdiction
The applicable law and the court that is to have
jurisdiction over any disputes arising from the
agreement should be clearly spelled out.
This is particularly true in any agreement between

parties residing in different jurisdictions or in
international agreements.
Where the governing law is outside the area

where your attorney practices the law, make sure
that a local lawyer is consulted for a “local law
check” of the agreement.
Term and Termination

The term of the agreement should be clearly stated as
well as the conditions under which the agreement will be
terminated.
It is important to consider all possible scenarios

under which you might desire to terminate the
agreement, such as any material failure to live up to or
comply with the terms of the agreement, bankruptcy, or
insolvency of the other party.
It is also extremely important to note which terms

of the contract, such as obligations of confidentiality or
the need to pay for goods and services delivered, are to
survive the termination of the contract.
In most contracts, it is important to note that

some terms will still be valid after the termination
of the agreement, such as the need to pay for
services already rendered, confidentiality,
agreements not to disparage the other party, and
the like.
Intellectual Property
Your contracts and agreements should make clear which
party owns the intellectual property, such as trademarks,
copyrights, etc., to be used in carrying out the agreement
and whether any rights are being transferred as a result

of the agreement or not.
The responsibility of the various parties to cooperate

in maintaining the integrity of the intellectual property,
such as use of trademark and copyright notices in
marketing materials, as well as the responsibility to
cooperate in any enforcement actions against violators
of the intellectual property, should also be clearly spelled
out.
Modifications
The method by which the contract may be changed
should be clearly stated. Typically any changes should
have to be in writing and signed by both parties to be
effective.
Waivers
The need for any waivers of any rights under the
contract to be in writing should also be clearly indicated
in the agreement.
Force Majeure
The scope of “acts of God” or “Force Majeure” that
may excuse failure to perform under the contract should
be clearly stated.
Some of these might include flooding, earthquakes,

or other natural disasters; civil unrest, war, industrial
disputes, and labor strikes; failures of public
communications or public transportation; and the need
to comply with any legal requirement or court order.
Counterparties and Facsimile Signatures

Particularly when dealing in an international context, it is
useful to allow for contracts to be executed in
counterparties and by facsimile signatures.
If this is the case, it should be clearly stated in the

agreement itself for avoidance of doubt.
This will allow both parties to execute a copy of the

agreement and send it by fax or scanned copy to the
other party.
We have saved paying FedEx, DHL, and UPS a lot

of money by adopting this efficient approach over the
years.
Signatures and Initials

Make sure that the signature page is properly signed and
that EVERY PAGE of the agreement is initialed.
This habit will ensure that people are not able to

easily alter the agreements, and it is very useful for
sorting out the executed copies of any loose pages from
any draft pages that may still be sitting around your
desk!
Initial every page of your agreements, not just

the signature page.
Legal Review
Every contract and agreement that you enter into should
be reviewed and approved by a competent attorney!
The risks of not having your agreements reviewed

are just too large to take.
Find a competent attorney, lawyer, barrister, or

whatever else they may be called in your part of the
world who understands your business and can advise
you on the appropriateness of your transactions.
Get a lawyer to read your contracts. It is less

expensive than not having a lawyer read your
contracts!
Tax Review
In addition to consulting your lawyer, you should always
consult with a competent tax professional prior to
entering into any agreement.
Sometimes one or two subtle changes in language

are all that is needed to dramatically reduce the tax
burden of the transaction you are contemplating.
Consult a tax professional in addition to your

lawyer!
Boilerplate
As you enter into agreements, be sure to capture any
excellent language that can be used for future
agreements.
The more contracts you do, the better your

contracts should become!
Collect good contract language for future use.
May all your agreements be dispute free,
James Skinner, Roice Krueger, Mark Victor Hansen
___________________________________________
To send this book to members of your team:
www.ideasthatcanchangeyourlife.com/gift
For more ideas on law:
www.ideasthatcanchangeyourlife.com/law
To contact the authors for a speaking engagement:
www.ideasthatcanchangeyourlife.com/speakers
___________________________________________

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ISBN 978-976-649-089-8

WWW. IDEAS THAT CAN CHANGE YOUR LIFE . COM

Agreements that Work

James Skinner, Roice Krueger, and Mark Victor Hansen

“Agreements that Work” will help you to make

Agreements that Work

ROICE KRUEGER co-founded Franklin Covey, the

MARK VICTOR HANSEN is the co-creator of the Chicken

NOTE: Ideas That Can Change Your Life™ is a

To contact the authors for keynote and other

Agreements that Work

Agreements That Work

A legal contract is basically a “meeting of the

In most cases, such as when you make a purchase at

It is important to remember that in many if not

For examples, someone may sue an estate based on

Agreements that Work

alive, or disputes may arise between two companies

Many contract disputes are argued by people

This book is not intended to be a substitute for

Having said this, however, after years and years of

While the list is not exhaustive—and indeed, given

Agreements that Work

make them less ambiguous and thus less likely to end in

Because a contract is an agreement it needs to

This could be as simple as “Contractor is in the

Agreements that Work

provide editing services for its books”; or it may be

Other Structural Issues

Agreements that Work

If there is any previous agreement that is intended to

If such are required, then the parties to the

Agreements that Work

It goes without saying that a contract that violates

A contract to violate the law does not exist in

Check that the terms of the contract are legal in the

Agreements that Work

“severability clause” that allows any provisions of the

This is important because unscrupulous persons

Licenses and Permits

Agreements that Work

employment, independent distributor, licensee and

Entering into agreements and contracts creates

Entering into contracts usually entails creating

If an agency is to be created or a power of attorney

Agreements that Work

party from entering into any agreements on your behalf

It is particularly important for businesses to ensure

It is highly desirable that limits or ceilings be placed

Agreements that Work

It is highly desirable that your agreements limit

Agreements that Work

How will confidential information be identified?

This is particularly true in any agreement between

Where the governing law is outside the area

Term and Termination

Agreements that Work

It is important to consider all possible scenarios

It is also extremely important to note which terms

In most contracts, it is important to note that

Agreements that Work

and whether any rights are being transferred as a result

The responsibility of the various parties to cooperate