The traditional view of a contract is a legal safety net to be filed and forgotten until a dispute arises. A relational contract, however, functions as an active 'playbook' for the partnership. It outlines the shared vision and guiding principles, serving as a practical, frequently referenced guide for collaboration and problem-solving, rather than a weapon.

Don't default to a 50/50 split on day one. Instead, agree to formally discuss equity only after reaching a predefined milestone, like $10,000 in revenue. This allows you to base the split on demonstrated contribution and commitment, avoiding the resentment from premature, misaligned agreements.

To predict the future health of a partnership, intentionally have difficult conversations before any investment is made. If you can't productively disagree or discuss serious problems before you're formally linked, it's highly unlikely you'll be able to do so when the stakes are higher post-investment.

When long-term contracts become imbalanced due to unforeseen events, the disadvantaged party subconsciously engages in 'shading and shirking'—subtle acts of non-cooperation to restore fairness. This deteriorates the relationship and creates hidden costs, as seen in the Dell/FedEx partnership before they adopted a relational model.

Kevin Bartlett's story shows how relying on a handshake deal with a trusted, older partner led to a complete loss of his expected multi-million dollar exit. Good intentions and personal relationships are not a substitute for formal contracts when business stakes are high.

When smart partners think the other is an idiot, it's often due to a 'base assumption collision.' Each person operates on a different fundamental, unspoken belief about reality ('the world is X'). Identifying and discussing these hidden assumptions is key to resolving otherwise intractable conflicts.

After working out 22 distressed joint ventures during the GFC, the key lesson was that partner quality dictates outcomes more than the deal itself. When things go wrong, good partners collaborate to find solutions, while bad partners create conflict, making even a good deal untenable.

The founder accepted below-market pay for years based on a vague verbal promise to be "treated right" later. This lack of specific terms for his sweat equity ultimately left him with no leverage and no payout, turning years of hard work into a costly lesson.

Companies are trapped by the dogma of creating 'bulletproof' contracts, a process driven by legal precedent and risk aversion ('nobody got fired for having the lawyers look at this'). This institutional inertia, codified in policies requiring standard terms, prevents the adoption of more flexible, relational contracts, which are often dismissed as 'fluffy' despite being 'radical common sense.'