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AGREEMENTS WITH FRIENDS AND FAMILY

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From November 2010, Sophisticated Woman Magazine - As Fall descends upon us, I find myself thinking about perils I have unfortunately encountered and those I hope to avoid. One common pitfall is entering into verbal agreements with friends and family.

When we were kids we made agreements with friends and family with few consequences. One fall I agreed to trade my Shetland pony in exchange for my sister's collection of miniature, ceramic Breyer horses. She started riding the pony, but I never received the Breyer horses. Although my heart was broken, there were no legal ramifications.

At some point in our lives most of us agree to help our family and friends. Examples of these agreements are parents guaranteeing their college-aged children's student loans, an aunt co-signing for a first vehicle, friends entering into a partnership, a brother borrowing money from his sister for a down payment on a house, or neighbors swapping power tools. As adults, these agreements have legal consequences.

Agreements with family and friends usually appear to be no-lose situations and we rarely reduce them into writing. We trust the people we lend a hand to and those from whom we accept assistance. Despite that, the possibility exists that the business venture will not go as planned or bad blood will develop between siblings. The result of this is usually one party not honoring their portion of the agreement.

As an attorney, I have encountered parties who have entered into verbal agreements that did not go as planned. The individuals find themselves seeking legal advice as the last option to compel the friend or family member to honor the agreement. Although Louisiana law generally recognizes verbal agreements, they are difficult to substantiate in a court of law.

There are numerous reasons to memorialize an agreement in writing. First, by getting all parties to sign it, everyone can review the terms they are agreeing to. Secondly, by requiring a signature, both parties tend to take the agreement more seriously and honor it. Third by ensuring the agreement is in writing, there is less likelihood that one party will deny its existence. Lastly, having a written contract decreases the chances of a "he said she said" battle in court, potentially turning on the believability of the individuals testifying.

Taking the time to memorialize agreements with family members and friends will not only protect financial interests in the future, but also relationships with the people involved.

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