Is it possible to contract about sharing income with a friend? by @R44D
Answer by Raad Ahmed:
First of all, I applaud your ambition and I hope you both become billionaires. Second, US contract law operates under the basic principle of freedom of contract, meaning two parties can contract for anything they want. There are a few requirements to make sure some people don’t get taken advantage of, but in general, the law will recognize a contract in any situation in which two parties mutually consent to the deal.
The actual agreement can be drawn up however the parties like and it seems like both you and your friend will have equal obligations and rights under the contract so there should be no problem with formation. You will probably need to define how annual income will be calculated, like you said it could be based on salary, stocks, options, or any type of income really. If you don’t define it specifically, US law will provide certain “gap-fillers” to fill in the gaps for anything that is not provided for in the contract. Courts will try to apply these in a way that matches the reasonable expectations of the parties, but it would be best for you and your friend to try to provide for everything yourself at the formation of the contract and avoid the gap fillers all together.
I only see two potential problems but they are both small. First, if you move out of the US, it is possible that a foreign court would not uphold a US contract. But, this depends on the court and most courts will likely uphold the contract if it was validly formed under the laws of the US in the US. The second problem is if the provisions in the contract aren’t drawn up properly and so the agreement as written provides for something that you didn’t actually want at the beginning. A court, in interpreting the contract will look only at the contract on its face and will only apply that meaning.
I would suggest that you seek an attorney to help you draw up the contract just to make sure it provides for everything that you want. An attorney that has experience drawing up contracts can do it for a small, flat fee and will work with you personally to get it right. If you are looking for an attorney to help you draw a contract or if you simply have more questions, feel free to check out. Our legal platform makes it easy for entrepreneurs to find a lawyer that works for their needs & budget.