Barter Agreements: When to Use Them & How to Write Them

A great part of Swapcove is getting to chat with a lot of people into barter. Usually they're brimming with stories about saving money, getting things they've always wanted and generally singing the virtues of barter that more and more people are becoming aware of.

Today however I've been chatting with June, an active swapper who's going through one of those (thankfully) rare situations where one person in the barter has taken advantage of the others good will. Here's June's story:

Basically what happened is that we took this guy in who was down on his luck and offered him a place to stay in exchange for some work on a foreclosure house that my son bought to remodel. It never occurred to me that he could claim residency after 30 days. He has turned out to be a nightmare and we can't get him out. We had a free 30 minute consultation with a lawyer who told us that he could stay forever in our house and that it will cost us $10,000 to get him out. He has stolen things from the house, he sold a bicycle we loaned him and he has threatened to burn the house down. The police will do nothing. We are still looking at all options and hope we can resolve this without having to pay a fortune in lawyer fees or have to give this slime ball any money. This is the kind of stuff that turns liberals into conservatives. Anyway, I just wanted to warn people to be very careful. There are con artists out to take advantage of soft hearted people.

The problem June's faced with is that she has no written documentation that she can rely on to show the nature of their agreement. If June and "Slime Ball" had written down the terms of their deal it would have made it much harder for something like this to happen - or at the very least, give her a strong line of argument to start with.

Apart from your average verbal/shake-on-it agreement that covers 99% of barter deals, the most common way to capture the intention of your swap is to write a simple barter agreement. These tend to be most useful if something goes wrong, but they're also great at establishing exactly what's expected of both parties from the outset, and possibly avoid a lot of later problems as a result.

So, what does a barter agreement look like? They come in many forms, but here are the 5 parts I include on the occasions where I feel an agreement is a good idea.

1. Start by stating the nature of the agreement, the date the agreement was made and who the parties involved are. For convenience sake, this is also a chance to shorten any names that will be referenced later in the agreement. For example:
   
   This simple agreement is made on July 27, 2009 between Mrs. June Friendly (the "House Owner") and Mr. Slime Ball (the "Laborer") and is intended to cover work done by Laborer in exchange for accommodation provided by House Owner during the time Laborer is engaged in said work.
   
   
   
2. Next define the scope of the agreement. Especially when ongoing services are involved the balancing act here is to keep it flexible enough that you can account for mid-course corrections without needing a new agreement without making it so open ended that anything goes. For example:
   
   Scope of Agreement
   Work performed by Laborer will primarily involve the renovation/restoration of apartment 123, 1 Swapcove Lane, San Francisco, CA. Work will include cleaning and maintaining the garden, cleaning and repainting interior walls and ceiling, polishing floors and any other work mutually agreed on by House Owner and Laborer.
   
   
   
3. Consideration, or in non-legalese, what you're "paying" for the good or service described in the previous section. Basically the same rules apply here as in the Scope of Agreement. Make is crystal clear about what's your end of the bargain is, but if you want some flexibility, leave some room mutually agreed extensions to the agreement. It's also worth mentioning here that there is no cash consideration, once again demonstrating that this should be treated as a barter agreement. For Example:
   
   Consideration
   In return for completing the above mentioned work, House Owner will provide Laborer with temporary accommodation at apartment 123, 1 Swapcove Land, San Francisco, CA during the time the work is being completed and for 2 weeks after completion.
   
   
   
4. In the last section of the agreement, include anything that you think is relevant to your specific barter. This might be anything from clarifying intellectual property rights for software you're developing, a fall-back agreement or law that you're relying on - any points that will address loose ends from the previous sections. For example:
   
   Not a Rental Agreement
   This agreement does not constitute any kind of rental agreement or imply any right to claim ongoing occupancy of 1 Swapcove Land, San Francisco, CA beyond the time agreed above.
   
   
   
5. Signatures - without pen to paper, a printed contract isn't much use. It's not as good, but if you're geographically isolated you can email the agreement to someone and ask them to email back a written acceptance. Base this on what's practical and your comfort level with the deal you're doing. For Example:
   
   Signed: ______________ Date: ____     ______________ Date: ____
                 June Friendly                              Slime Ball

Now - a couple of really key points to keep in mind...

First of all - One of the nice things about barter is its simplicity, so don't feel obliged to jump in and do agreements every time you swap a DVD or an hour of work. Agreements tend to be used for some of the larger or more complicated barter transactions. The vast majority of the time a written agreement probably an unnecessary step.

In general, you're far more likely to get scammed trading with cash than through barter. In so many barter deals you'll see people building trust in each other, resulting in them doing many swaps together over time. This is another of the great parts of barter and certainly puts it in the too-hard basket for many people who are out to rip you off.

Next - I'm not a lawyer, this is just a basic format that's worked well for me on the occasions when I felt an agreement would handy. If you're interested in getting the legal detail on the topic, consult your friendly local law professional.

To that point, don't fall into the trap of thinking your agreement is somehow bullet proof. Just think of it as an easy way to reduce the time spent on certain arguments such as the existence of an oral or implied agreement that differs to what you have on paper.

So that's it! Just like when you buy something, barter is almost always a hassle free way to trade goods and services. But, also like buying things, there are times when a barter can go sour. It's those times when hours of hassle or thousands of dollars can be saved by spending a few minutes putt together a simple barter agreement.

World, meet Swapcove.com

Tonight I'm very pleased to announce the launch of Swapcove, a way to swap what you have for what you want.

So here is the premise - When times are good, people will spend some percentage of their income satisfying their wants. This principle applies to everyone; For one person it might mean some new clothes, for another it's trying out that adventure sport that looks like a blast, for a lucky few it might mean upgrading one of the jets to something less cramped. Regardless, once the harder times hit us (eg: now), that percentage shrinks as people focus on their financial safety net. What happens at this point? A big portion of those wants go unsatisfied.

Sure, conventional wisdom might have something to say about "having your cake and eating it too", but surely there's a way to be save your money and still be able to do all the fun and interesting things you want to do with your life.

It was when I arrived at this question that I realized how much stuff most of us having laying around that, given the choice, we would trade for something higher on our personal priority list. Additionally, someone probably has what you want, and quite possibly would trade for it if the right deal came to them. All I had to do was figure out how to bring these people and their items together.

Hunting around I realized pretty quickly that most forms of exchange have been replicated online, eBay is fantastic for auctions, likewise Amazon for retail and eTrade for stocks and so on. After much research, including going back to the invention of currency thousands of years ago, I understood what shortcomings barter had in a pre-internet world, how to overcome them, and why now is the exactly the right time to fill that gap in online exchange.

It was starting from there that I began working on a solution, joined shortly after my mate Brad Kellett. The result is a site with some key differences to what you might have seen before:

• Swapcove is designed for you to list anything you'd swap if the right deal came along, not just stuff you specifically want to get rid of.
• Offers can include any number of items on either side of the swap.
• If an offer is close but not quite there, you can propose a counter offer.
• You can swap services.
• Swapping is based on value, not price. If a deal is worthwhile to you, go for it. Swapcove wont get in the way with point systems, estimated value or anything like that. You decide if it's a good swap.

The site's up so go ahead and create an account, add some items and start swapping. I'd love to hear your feedback too, so feel free to email me at luke@swapcove.com or via our getSatisfaction site, and keep in mind that it's still early days - There's a LOT more in the works.