Make the money move faster

Published in El Pais, January 28th 2020 and in Los Tiempos January 21st 2020.

In the business world, we always see that lawyers are the ones who prepare the contracts so that everyone involved does what they should do and everything is clear. We do it so that there is no doubt and because we don’t always trust the other party. However, many deals are made without a pen and without lawyers and I don’t mean just buying bread at the corner store.

Some people think that each contract has to be written, but it is not necessary. At the moment you say I want to buy 10 loaves and the lady says it’s okay, there is already an oral contract that involves the delivery of ten loaves and the payment of these in the following minutes. But you can also see large amounts agreements orally. Oral does not mean that they are not valid, but making contracts with a lawyer and notaries would be a high cost and would stop the transaction for a few days, which slows the economic movement. Obviously, a contract clarifies everything, but you won’t have all clauses for everything that could arise. Therefore, a deal under the confidence and good intention of both parties is much more important than what a lawyer can write.

At the end of the day, for an economy to flourish, it is important that money moves fast. This involves greater movement of purchases and sales, labor contracts, rentals, etc. Money stopped in a bank account, in a piggy bank or under the mattress does not help the economy grow. In order for us to motivate the growth of the economy, it is important to build a good system of contractual rights. This refers above all to a business climate where everyone understands and knows that a person’s word is valid, whether oral or written; Above all, respect between two people who converge to a deal or a business. A successful negotiation should result in both parties winning and nobody feeling disadvantaged in relation to the other party at the time of the agreement, not even at a later moment. The English taught us the concept of “Gentlemen’s agreement”. This in theory had no legal value, but in practice, the one who did not comply would have serious problems in society to do more future business. The modern version of this we have in the “reviews” of Uber, Ebay, AirBnb etc. If the product was not as expected, it will have consequences on social networks. So in order that deals and business are going well, we cannot waste time making contracts with lawyers. If we want to move the economy, it is necessary to make contracts faster, taking into account the intention and size of the contract, of course.

About Arnold Hagens 204 Articles
Arnold Hagens is Economist with strong interest in technology, health and coaching

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