How To Protect Yourself From the Risks Of Bartering
By
James Harvey Stout (deceased). This material is now in the public
domain. The complete collection of Mr. Stout's writing is now at
http://stout.mybravenet.com/public_html/h/
>
Jump to the following topics:
- Beware
of these possible problems from a barter club.
- Beware of
the dangers of unit surpluses.
- Beware
of the possible dangers from other barter-club members.
Beware
of these possible problems from a barter club.
- The club's owner might spend units which he or she has not
earned; this situation is like that of a counterfeiter who prints
money.
- The club can go out of business. If this happens, the units in
our account become worthless -- at a value of $1 each. The club's
termination might be due to cash flow problems, general
mismanagement, legal difficulties, or another problem.
Beware of
the dangers of unit surpluses. When we accumulate too many units, we
encounter a few problems: (1) As explained previously, the units will
have no value if the club ceases operations; (2) Units, unlike the
cash in our bank account, do not accumulate interest while they are
in our barter-club account. To be certain that we do not accumulate
an excessive number of units, we can take these precautions:
- Be wary if you are besieged by other members who want your
goods or service on your first day of membership. If that happens,
refuse to accept any more units until you know why these people
seem to be trying to get rid of theirs; perhaps the members want
to dump worthless units from this unstable barter club. However,
this phenomenon might not be a danger sign; instead it might be a
favorable indication that your goods and services are badly needed
by the club, and that you now have a significant new source of
income.
- To use up our surplus of units we can use a few strategies:
- "Stock up" on the few items that you can get through the
club. For example, a five-years' supply of wrapping paper might
be a better asset than a stockpile of unused units.
- Use some of the techniques for turning barter-club units
into cash. (Those techniques are presented in the chapter
regarding cash flow.)
- Recruit some businesses who have the goods and the services
which you want. When those businesses join the barter club, we
can receive a commission from the referral, and we will gain a
new business in which to spend our units.
- Before joining the club, ask about the policy regarding
members who quit when they have a surplus of units. At one club,
the management would give us one year in which to spend them.
Beware
of the possible dangers from other barter-club members.
- Don't pay more when you are paying with barter-club units. If
the members know that we will be paying with units, they might
charge a higher price, or they might add a service fee. (In many
barter clubs, this practice is prohibited.) If the club members
are inflating their prices, they have to pay more for the goods
and services, and they will also have to pay more taxes on this
increased income; for example, if we sell a $100 typewriter at the
inflated price of 200 units, we will have to pay the taxes of a
$200 deal, as though each unit equals one dollar.
- Check the credentials of your barter partner. In some cases,
we might want to ask whether the person has references, insurance,
bonding, adequate training and experience, the proper tools, any
necessary licensing or permits, guarantees or warranties, etc. If
we are lending equipment, we need to know that the borrower has
had experience in the operation and maintenance of that equipment.
- Remember that the barter club is not responsible for the
actions of its members. Many clubs have a disclaimer; for example,
when I worked for a barter club, I told the members, "We try to
set up trades which will be acceptable for everyone. But we assume
no legal liability for the exchange of goods or services or any
faults or damage which might occur." The management might be
unable (or unwilling) to resolve our legal dispute with a member
-- although some clubs will intervene by talking to the
offending member, or submitting the dispute to the club's
arbitration board (or "ethics committee"), or perhaps dismissing
the member.
- Check a member's credit and status at the club. For example,
at one club, a transaction cannot occur until it first receives a
purchase-order number through the club's office. If the sale is
worth more than $500, the club's owner must provide written
approval.
- Consider the need for a written contract. In the contract, we
can mention details such as a deadline, an exact description of
the job (with sizes, quantities, materials), location of the job,
delivery of any materials or the finished product, guarantees,
limitations, and terms for collecting in case of default. In many
cases, a handshake is legally binding in a deal. But if we go to
court over the deal, a written contract helps to assure that we
will get what we were promised. (The contract can be written by an
attorney who is a member of our barter club.) Annie Proulx
explains contracts in her book, What'll You Take For It? (Back
To Barter), copyright 1981 Garden Way, Inc. The excerpt is
reprinted here courtesy of Garden Way Publishing: "Barter
agreements are legal contracts. Once you and your swapping partner
have agreed on a trade, it's binding in court. Generally, barter
transactions fall under the Uniform Commercial Code which most
states have enacted. Under the code (UCC 2-201) when goods are
exchanged between traders, if the value of the goods is under
$500, an oral contract is sufficient to bind, unless there is some
inequity or weakness in it, and it will stand up in court. Many
traders do business on the proverbial handshake and their given
word, even in large transactions. Naturally, these quick, simple,
and mutually trusting deals are usually between traders who know
each other well and respect each other's word. Almost all country
barter is done this way, but many newcomers to swapping are not
aware that their casual agreements to swap are binding legal
contracts. True, your neighbor is not going to haul you into court
because you failed to supply him with half the rabbits from the
doe he gave you, but he could. When goods with a value of over
$500 are exchanged, the code says a simple verbal agreement is not
enough. There must be some written indication of the swap with the
signatures of both traders affixed, or the agreement is not
"enforceable." It is an excellent general policy to put swaps into
writing if you are dealing with an unknown person for the first
time, if you are involved in interstate swapping (different state
laws may apply to the trade, and the traders have a choice of
which state's laws they follow), if you are trading through the
mails, or if the goods and services being exchanged are especially
valuable, important, perishable, or in any other way fraught with
possible problems and mishaps."