May 15, 2007
How
To Protect Yourself From the Risks Of Bartering
By James Stout, Former Writer for BarterNews
Beware of these possible
problems from a barter club.
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The club's owner might spend units (trade dollars) which he or she
has not earned; this situation is like that of a
counterfeiter who prints money.
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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:
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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.
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To use up our surplus of units we can use a few strategies:
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"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.
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Use some of the
techniques for turning barter-club units into cash.
(Those techniques are presented in the chapter
regarding cash flow.)
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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.
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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.
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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.
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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.
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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.
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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.
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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."
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