Products Versus Services: Buy with Intention

Have you ever bought a product or service from a new source and then felt disappointed? Was the expectation too high, or was the delivery too low? Today, we live in an experience-based economy. Delivering a defect-free product is no longer enough. Amazon and others figured this out and capitalized on making the buying event something we want to repeat. Read the article to learn how contracts can help you buy with intention and enjoy your customer journey at every stage.

Products Versus Services

The customer journey is different when buying products and services, though the functions may be the same. The basic functions are vendor selection, product selection, order placement, fulfillment, and payment. Existing products typically have a spec sheet or attributes, so product selection is merely picking the desired or available widget. The selected vendor can then receive the order, pick it off the shelf, throw the widget in the box, hand it off for delivery and run the credit card. Amazon and others offer a simple return policy if the widget arrives and something is not right.

Buy with Intention

Naturally, the customer journey for services and specially made products are different. The focus of this article is: how to improve your customer journey when buying services or specially made products. The short answer is to buy with intention by using a written contract. Assuming that you selected the right vendor, there is no better way to receive a great customer experience than to get it in writing.

Where Do You Want To Go?

Lewis Carol wrote in “Alice in Wonderland,” “If you don’t know where you want to go, then it doesn’t matter which path you take.” As a commercial lawyer for almost 30 years, I have handled thousands of transactions.  My clients fall into two categories, those who use professionally written contracts and those who wish they did. Unfortunately, some lessons in life and business can only be learned with pain.

Get It in Writing

A key legal principle is “get it in writing”. The English Parliament established the writing requirement in 1677 in the “Act for the Prevention of Frauds and Perjuries,” which is better known as simply the “Statute of Frauds.” Many statutes have attempted to promote this principle in modern commerce, including the Article 2 of the Uniform Commercial Code (“UCC”).  For example, §2-201 says that deals involving the sale of goods with a value of $500 or more are unenforceable unless there is a signed written contract.

Legislators for centuries recognized that important contracts must be in writing.  They have defined “important contracts” to include those involving real estate, personal guarantees, inheritance, and products with a value of at least $500. They have tried to guard against injustice that can occur from fading memories, missing witnesses, misunderstandings, fraud, or the rationalization of self-interest.

Gentlemen Versus Scoundrels

Choose your vendors carefully.  Scammers and fraudsters are working very hard to separate you from your money. I am not only referring to phishing farms, which is somewhat of a different issue. There are still plenty of unscrupulous vendors that try to lure you into making an unconditional obligation to pay without a corresponding obligation to perform.  Without a professionally written contract that favors the buyer, you bear more risk.

Misunderstanding

Assuming that you pick an honest and ethical trading partner, casual conversation and oral agreements are far more likely to lead to problems, than with a professionally written contract.  Does the contract clearly articulate expectations?  Are key terms properly defined?  Starting with a good template reduces the likelihood that you omit a material term, or that ambiguous language will lead to a misunderstanding.

Memory

A client once told me that the ideal contract is one that goes in the drawer after it is signed and never looked at again.  In business-to-business (B2B) transactions, I certainly agree. One of the wonderful things about B2B is that parties develop long-term, mutually beneficial relationships over years of doing countless transactions.  Everyone knows the rules and follows them to the best of their ability. 

However, even in this nirvana, stuff happens, like hurricanes, pandemics, global supply chain shortages, product defects, and vehicle crashes. That is when it may be necessary to pull out that written contract, which was signed years ago, and figure out what to do because nobody remembers or was even around when the contract went into the drawer. Well-written contracts are more likely to deliver solutions. Memories typically fade faster than ink.

Third-Party Paper

The Romans had a saying that still rings true today: “Caveat Emptor,” meaning let the buyer beware.  Vendors often are in a superior position in a transaction because it is what they do, and they have superior knowledge about all the aspects of the deal and what can go wrong. Therefore, most Vendors will develop a written contract for you to sign.

News Flash: written contracts from a Vendor rarely contain many provisions that favor the buyer. Don’t hate the player, hate the game.  If you are in the Vendor’s shoes, it is called prudence. 

At Waldrop & Colvin, we help Vendors draft standard sales contracts, terms and conditions, credit agreements, website terms of use, privacy policies, et cetera. Our clients use them to manage their risk. Written contracts that we have drafted for current and former clients are used to transact over $10B per year. Some clients prefer their written contracts to be very one-sided.  Others ask for a more balanced approach.  I cannot recall a client asking for a sales contract that favors the buyer, unless they are the buyer.

Templates

Written contracts that favor your perspective will allow you to manage risk and get a better deal.  Do-it-yourself templates are often great for lower-value and lower-risk deals. Many are written to allow non-lawyers to easily insert critical information that is necessary to get a good result.

When Do You Need a Lawyer

When the stakes are high or the deal is complex or unique, it often pays to invest in hiring an experienced commercial lawyer to assist.  Experienced lawyers have learned how to spot good deals from failure and can guide clients accordingly. Whether you present the seller with your contract or need to review third-party paper, experienced commercial lawyers can deliver great value by customizing the contract to the deal or doing a redline of third-party paper to prepare for a negotiation. 

For example, are the nature of the services routine, or are you designing a masterpiece?  Are the functional requirements clearly defined?  I often ask my clients, “What does success look like?” and ensure that the contract is structured to accomplish that image. 

Negotiation

Dr. Chester L. Karrass wrote a book entitled: In business as in life, you don’t get what you deserve, you get what you negotiate.  My experience has found this adage to be true. Negotiation is all about the satisfaction that we get from experience. It is not just about the product, place and time of delivery, or price. In other words, it is all about the customer journey. 

Conclusion

We are in an experience-based economy.  Using a written contract for services and specially made goods allows you the best chance to actually get what you negotiate.  The written contract allows you to buy with intention by defining the specifications of the product or service and articulating fulfillment requirements like a method of shipment and due date, along with payment terms.

 John Allen with Waldrop & Colvin has a vast and impressive history of success in world-class legal departments across several industries, including government contracting, real estate development, medical technology, construction logistics & finance, and private equity.  He has been both a “one-man band” as well as the leader of a team of high-performing legal professionals. His experience delivers results in corporate governance, contracts, M&A, dispute resolution, employment, and real estate.

Article by John Allen

John Allen with Waldrop & Colvin has a vast and impressive history of success in world-class legal departments across several industries, including government contracting, real estate development, medical technology, construction logistics & finance, and private equity.  He has been both a "one-man band" as well as the leader of a team of high-performing legal professionals. His experience delivers results in corporate governance, contracts, M&A, dispute resolution, employment, and real estate.

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