hen two parties are getting along well, a very bad situation can usually be settled without difficulty. When two parties are not getting along well, a minor issue can become catastrophic for the relationship.

As I review the columns I wrote during 2003, I notice that in almost every one I mentioned something about the importance of personal relationships-from a legal perspective. I have decided to devote this column exclusively to that topic.

Notwithstanding what appears below, the importance of the legal relationship between two parties and the specific wording of contracts between these parties must never be overlooked. With a disclaimer out of the way, here are 10 points to keep in mind-from a legal perspective-concerning the importance of personal relationships:

1. Exercise of Rights is Not Mandatory

   If you are in serious default under a processor or ISO agreement, the bank or processor that is the other party to the agreement usually has (as you are very likely aware) a broad range of remedies available to recover the damages it has incurred and sometimes to penalize you for the default. I recommend taking this range of choices into consideration throughout the term of your agreements in this business.

   In the unlikely scenario that the party opposite you has to decide on which remedies to exercise against you, your personal relationship with the key players in that party is at least as important, if not more important, than the substance of the dispute between the parties.

   I do not mean to reduce the confidence of processors or ISOs out there, but merely to have them step back for a moment to consider that decisions are made by people at the end of the day and not by written procedures or contracts.

2. Misunderstandings Cause Half of All Disputes

   Although based only on an informal review of issues I have seen in the electronic transactions business over the past few years, I am confident in saying that more than half of the disputes arise from misunderstandings.

   I define a misunderstanding as one party not knowing the true facts of a situation at the time when they should know those facts.

   For better or for worse, a number of safeguards in our business are exercised by automatic computer systems that, for example, close a merchant account following the processing of more than a prescribed amount within a given month.

   As a consequence, the machinery of our business can be ground to a halt when the parties operating that machinery had no intention of interrupting the ordinary flow of business. To avoid these kinds of misunderstandings, develop a keen knowledge of the limits for each ISO or merchant in your business, and share as much information as possible-wherever possible-in real time.

3. Most People are Reasonable

   Perhaps this is just my optimistic personality speaking; however, it is my experience that most participants in our business are reasonable people, especially when they are in a good mood. This is not the kind of advice to take to the bank, nor is it the kind of advice you usually hear from a lawyer.

   As much as it is important to be legalistic and careful with your legal obligations and contracts, I am also very sensitive to the need to be realistic and grounded in the real world to solve the kinds of complex problems that arise in the electronic transactions business.

   This point would be incomplete without mentioning that there are some characters in our business who are extremely negative and destructive of trusting relationships. Steer clear of these personalities.

4. Suing is Too Expensive

   Litigation is more often a losing proposition, even when significant amounts are at stake. Litigation in our business often requires education of the attorneys involved as well as the judge presiding in the case. This important and time-consuming education is over and above the usual time and expense related to bringing a legal claim to trial.

5. Drafting Good Contracts: Preventive Medicine

   Even the most well-intentioned individuals occasionally forget the specific terms of an agreement that they have made. This is why even the most trusting and optimistic individual is advised to take time to carefully negotiate in draft all commercial agreements. I am trying to avoid being blunt, but do speak to a lawyer once in a while.

6. Leverage your Good Relationships

   Good relationships leverage themselves. If your business counterparts like and trust you, then that appreciation and trust is like compound interest on a bank account: it works for you while you sleep. Don't make the mistake of underestimating this hidden upside of good business relationships.

7. Small Problems Grow

   Most big issues begin as very small issues. Many issues can be nipped before they get out of hand.

8. Electronic Transactions Requires Good Relationships

   Because of the complexity of the electronic transactions business, it is important to be sensitive to the personal relationships surrounding your business and legal deals-maybe more so than in other businesses.

9. Take Notes

   Whenever you are negotiating a business deal, or having a telephone conversation concerning a menu issue that could become significant, get into the habit of taking notes.

   Your notes should include the name of the parties at the meeting or conversation, the date, the time and the substance of the conversation. At a later date, these notes may be used as evidence to determine the intent of the parties at the time of the formation of an agreement. The notes will also serve to remind you of the deals you have made.

10. Bad Apples

    Creating good business relationships is not all about improving yourself. Half of the task is improving your ability to determine whether the party opposite you is suitable as a business partner for you.

    The electronic transactions business is very much a business about sales. And as a sales professional, you come to know personalities. Use this knowledge to your benefit and get involved only with people you trust.

I also advise entering into business relationships with people you trust and admire. In a word, be friendly, and know who your friends are.

As my mother has always told me, it's never too late to make enemies.

In publishing The Green Sheet, neither the author nor the publisher is engaged in rendering legal, accounting or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. For further information on this article, please contact Adam Atlas, Attorney at Law e-mail: atlas@adamatlas.com phone: 514-842-0886.