“Caveat Emptor” is a Latin for “let the buyer beware” before completing a purchase. This contract law assigns the burden of verification on the buyer rather that the seller. In general, the seller will have more in-depth knowledge about the goods to be sold than the buyer, thus creating an asymmetrical relationship. This leads to potential abuse by the seller, and as a result, governments enacted various laws to protect the buyers.

The principle of having a diligent buyer when making a purchase carries well into the situation when contemplating entering into a potential partnership with a third party. Consider the fable about the fox and the goat.

A fox stumbles into a deep well and can’t climb out of the well on its own strength. A thirsty goat passes by the well and the fox encourages the goat to get into the well to quench its thirst by stating that the well water is very tasty. As soon as the goat gets into the well, the two of them are now trapped inside the well walls without an easy way to get out.

The fox suggests that by cooperating together they can get out of the well by climbing over the head of the goat and then help the goat to climb out of the well. Once reaching the ground, the fox not only refuses to help the goat to escape but lectures the goat that it was a big mistake to jump into the well in the first place without knowing how to get out.

The moral of the story is to think and analyze your various options before you make a major decision. Taking a leap without a careful assessment may get you into a messy situation that could result in financial, legal and personal ramifications. Be cautious and follow the Caveat Emptor rule when negotiating the partnership agreement.

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Written by

Eli Fathi

Eli has been a technology entrepreneur for the past 30 years and has founded or cofounded a number of companies with a few successful exits. Currently, he is the CEO of Squanto.net a company offering automated fraud detection platform. Eli was the cofounder of Fluidware Corporation, an Internet software company offering Software as a service (SaaS) online applications based on collaborative feedback. He was the co-CEO from inception until the acquisition by SurveyMonkey.

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