One of the downsides of having over 30 years knowledge and experience in law is that I often come across people who are very firmly of the view that they know what they are doing, and I have to politely explain to them that they are wrong.  Even worse is when I have to try and extract them from a situation they didn’t even realise was dangerous until it was too late.

Most commonly it’s the people who make assumptions.  Such as people who assume that because they have lived with their partner for two years or more, they have become common law spouses (there is no such thing) and therefore they have the same rights as they would do if they’d walked down the aisle together (not true).

Another regular conversation is with people who believe that they don’t need a contract such as a shareholders agreement, because they are going into business with someone that they trust and it will be fine.  Well obviously you trust them – you wouldn’t be going into business with them if you didn’t.  But trust won’t get you very far if they die, become incapacitate, get divorced or go bankrupt.  All things that are beyond your or their control and all things that could easily have an adverse effect on your business if you don’t have the right paperwork in place.

Of course, despite appearances to the contrary, I’m not actually so arrogant as to assume that I know it all, and today I learned a new one.

Did you know that when you put money in your bank account, the money ceases to be yours.  What you are actually doing is lending it to the bank.  When you go to the ATM machine and withdraw cash, you are asking them to repay the loan.  Now whilst the loan is repayable on demand, sometimes people renege on loans and if they don’t have the money to repay you, you will lose out.  Obviously with banks we have a degree of protection both from their regulator and from the government, but that can take time and may not give you everything back.  You’ve only got to look at things like Barings to realise that nothing is ever guaranteed.

Obviously I’m not suggesting that we should all withdraw our money and put it under the mattress (although if interest rates go negative that might be cheaper) but it’s a good example of how we all make assumptions and take things for granted, when we should be paying more attention to what we are signing up to, and what we can do to mitigate our risks.  It wouldn’t be practical to run our affairs without a bank accounts, but we can spread the risk by banking with more than one organisation.  It wouldn’t be practical to expect all of the people we go into business with to be fully vetted and assessed for honesty, reliability etc in advance, but we can have contracts and agreements in place with them to give us a degree of protection.  Not everyone wants to get married, but we can have co habitation agreements so that if things do go wrong, there is something in place that will make sure everyone knows where they stand.

Kleyman & Co Solicitors.  The full service law firm.  You can bank on us.