Opinion: How To Avoid The Pitfalls Of Mixing Business With Friends


Working with friends may seem like a great idea and a simple solution to building a development team you can count on, however in the complex world of property development working with friends can present a plethora of pitfalls which can prove costly and unfriendly if things turn sour.

While construction relationships of years gone by may have been forged by handshakes alone, in today’s complex business environment, a verbal agreement between friends is no longer enough to recognise the intricate rights, obligations and duties of both parties involved.

Here are some tips to protect your business when negotiating contracts and partnerships with friends:

1. A Legally Binding Contract is not a dirty word

These days, a friendly handshake won’t hold up in court so it’s important to have legally binding documents put into place before any works commence.


Friends may be offended if you request a properly documented agreement over their word, however in todays modern legal landscape it’s a necessity in order to safeguard the success of your project.

A written agreement will outline basic legal frameworks and account for all possible and probable risk factors. It will also define the role and expectations of all involved parties to avoid any misconceptions.
2. Close friendships should rely on Contracts
An established personal relationship between two parties does not preclude the need for formalising a deal or arrangement via contract.

Sometimes, when friends agree to work together, they may take the agreement for granted and not properly discuss the risks, obligations and legal ramifications involved.

The stronger the relationship, the more important it is to have a clear and agreed set of terms to ensure that if things don’t go to plan, the relationship is not unduly stressed beyond repair.

By having legal documents drawn up, both parties can acknowledge what their legal requirements are as well as the ramifications should those requirements not be met - thus diminishing the risk of miscommunication.
3. Clarify terms of agreement before commencing any work (Prepare for the worst, hope for the best)
By creating a contract prior to any works commencing, each party’s responsibilities will be clear and will eliminate the chance of any ambiguities about each party’s perceived responsibilities.

In a best case scenario the signed Contract can go in the ‘bottom drawer’ and never be referred to again!
4. Don’t be blindsided by previous successful projects
You may have previously worked with a friend on other successful projects, however every project comes with its own unique risks and complexities.

One smooth sailing project doesn’t necessarily mean the next project will follow suit, so it’s better to not only safeguard your project, but your friendship as well.


Article by Verve Projects

Show Comments
advertise with us
The Urban Developer is Australia’s largest, most engaged and fastest growing community of property developers and urban development professionals. Connect your business with business and reach out to our partnerships team today.
Article originally posted at: