I was talking to the lawyer the other day. A contract on a property purchase I am negotiating has a few nasty special clauses. The contract called for a directors personal guarantee (to complete) should a corporate purchaser fail to complete. These clauses were once rare, but you can’t keep secrets in contracts, so they are more common.
Now in this case I am the director of a trustee company, for a unit trust I have no benefit in. This is strictly a fee for service gig, so I am effectively an employee. Why would I provide such a guarantee to a vendor for my employer? How much would I want to guarantee specific performance? Give me a moment to do the math…
Yup, as I thought. They don’t pay me enough.
I won’t even ponder the value of a guarantee from me. I don’t own anything. The smarter Marx (Groucho not Karl) said
I would never belong to a club that would have me as a member
. Should I do business with someone that would have me as a client? 😉 Lets leave that thought for another day.
OK so the lawyer explains that it is perfectly normal to expect specific performance and director liability. She tells me that I’d want the same certainty if the roles were reversed.
And that dear readers is my typically long-winded point. Always do deals in your own interest. I don’t give personal guarantees for entities I do not control. I expect personal guarantees from parties purchasing my assets. Yes it’s a double standard. “I don’t want to seem like a bad guy” is not a reason for a business decision.
Next article is on Win-Win versus Win-Lose strategies.