Barter Agreements: Avoid These 4 Mistakes

If you're interested in setting up a trade that doesn't involve any money changing hands, you'll probably be well-served by a barter deal. But don't go into it without thinking: In many cases, people who don't have the right legal help can end up getting royally screwed on barters. Even if you think you're setting up a fair, balanced exchange, there's more than one way to totally get suckered into making an unfair trade. If you're ready to barter, here are 4 mistakes you simply have to avoid no matter what. The information provided here is for general information only and should not be used as legal advice.

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Barter Agreements: 4 Mistakes To Avoid

  1. Not Getting Everything In Writing. Even if you completely trust the person you're doing business with, if you don't get evidence of the barter agreement in writing, no court of law can help you should something go wrong. Don't be fooled by people who seem legitimate. You don't want to make a fatal mistake that ends up cheating you out of what's rightfully yours.
  2. Not Creating An Equal Trade-Off. You wouldn't trade a brand-new Xbox for an ancient Nintendo and call it a fair deal. However, the discrepancy between services and goods isn't always that obvious. When you're making a deal, make sure that the service or product your offering is equal to what you're getting. Total up the value of the product or the hours you're putting into the service to make sure you're not getting the raw end of the deal.
  3. Not Making Sure It's Fully Legal. While most any barter arrangement can be totally legal with the help of the right lawyer, there are some trades that can easily fall into a shady legal area if you're not careful. As always, consult with your lawyer before signing or agreeing to any barter arrangement.
  4. Not Having Your Lawyer Present. You never want to put yourself in a legally vulnerable situation, especially if there's no possibility of a paper trail and you can't prove a transaction with receipts. That's where your lawyer comes in. Before setting up a barter deal, always make sure your lawyer has the last word.

What If I Was Taken Advantage Of?

If you believe that you've been willfully cheated during a barter agreement, the first thing you need to do is get in contact with your lawyer immediately. While it may prove difficult to bring suit against someone who didn't fulfill their end of the bargain, the existence of a contract or a chain of texts and emails may help you bring your case to court and win. Get in touch with your lawyer immediately, and cease communication with the other party until your lawyer gives you further instruction.

What Counts As Bartering?

Traditionally, barter agreements are divided into three distinct categories. These are:

  • Goods for goods, i.e. swapping one product for another of similar value.
  • Goods for services, i.e. swapping a product for a comparable service.
  • Services for services, i.e. exchanging equal tasks or labor.

Barter Industry By Sector, 2018

In 2018, 30% of all barter agreements fell under the heading of corporate barter, 20% under retail barter, and 50% under countertrade.

  • Corporate Barter: Funds for funds, stocks, trade credit, vendor subscription agreements, TV advertising, publicity, future purchases.
  • Retail Barter: Goods exchange, online trade, local goods and services.
  • Countertrade: International transactions, debt exchange, large scale goods exchange.

Barter Industry Statistics

  • Bartering accounts for 30% of global business yearly.
  • 70% of Fortune 500 companies partake in billions of dollars worth of barter trades each year.
  • 65% of New York Stock Exchange listed companies use barter trade.
  • According to IRTA (The International Reciprocal Trade Association) over 400,000 U.S. businesses use barter deals to exchange goods.
  • Countertrade makes up an estimated 20 - 25% of all yearly barter agreements.
  • Nearly one third of all U.S. businesses use bartering.
  • Bartering makes up nearly 30% of global trade each year.

What Happens To My Taxes?

While bartering might seem to save you money, if you're operating on a corporate level or if you're a self-employed person, your barter exchange will still result in owed money to the IRS. If you've kept track of your exchanges during the year, here's how you can figure out what to do about your owed taxes for the year.

Type of Barter IRS Form Deadline
Goods for Goods, Noncommercial None None
Goods for Goods, Commercial Schedule C, 1099-B April 15
Goods for Services, Noncommercial None None
Goods for Services Commercial Schedule C, 1099-B April 15
Services for Services, Noncommercial None None
Services for Services, Commercial Schedule C, 1099-B April 15

In Depth

Money is an unmistakably important part of our world. But make no mistake: Not every transaction has to do with an exchange of goods for money. In fact, many legitimate business agreements don't require any money changing hands. When you're a business owner with a service to provide, you can set up an exchange with another business, creating mutually-agreed upon terms to make everything totally legitimate.

But beware: While barter agreements can be a great way to exchange goods and services, you can also leave room for yourself to get fully screwed over if you don't set up the right protections. You might think that everything's on the up and up, but don't find yourself in the kind of mess that hundreds of people with high expectations put themselves in every day when they set up Craigslist ads asking for sex in exchange for rent, World Series Tickets, or a trip to see your favorite performer in concert.

If you want to set up a barter agreement the right way, don't hesitate. Be sure to consult our brief guide on creating the right kind of barter system found right on this page. Check it out beneath this video to get in touch with an experienced lawyer right away. Want to create the right kind of exchange without getting in legal trouble? Here are four mistakes you should never, ever make.

Here are four mistakes you should never, ever make.

#1: Get Everything In Writing. Sure, it's one thing to say you're going to exchange one type of service for another, but if you don't have it in writing, you could end up seriously screwed. Consider the hundreds of people who use Craigslist's barter tool every day. While some, like a woman from Bakersfield California, got a $100 air conditioner for free, another man tried to trick a teenager into getting him a higher Pokemon Go score for two pounds of beef jerky.

It just goes to show that even if the trade goes well, you're never guaranteed an equal trade-off. Unless you've signed a contract or kept the correspondence, you could easily wind up in a vulnerable position where you don't get what you were promised. If you feel you've been cheated on a barter deal, check out our guide right away to make sure justice is done. You can find it on this page. Scroll beneath this video to link with an experienced lawyer this instant.

#2: Make Sure The Exchange Is Equal. While in some fictional, as well as real-life, scenarios, bartering is used to exchange goods that aren't exactly easy to obtain by legal means, it's still important to make sure any barter you set up requires an equal exchange. For instance, while the premise of "50 Shades Of Grey" revolves around a young woman signing a dominance and submission contract that stipulates she has to do everything her boss says, in real life, this would be extremely dodgy territory to enter into.

While in some fictional, as well as real-life, scenarios, bartering is used to exchange goods that aren't exactly easy to obtain by legal means, it's still important to make sure any barter you set up requires an equal exchange.

You never want to end up like any of the patients of the real-life North Carolina doctor who agreed to exchange sex with his patients for prescription drugs. When you're dealing with a barter agreement, you need to make sure that what your trading has a quantifiable value. If you're being asked, like these women were, to exchange sex for something equally illicit, it's always wise to take a step back and ask yourself whether the tradeoff is actually equal. Which brings us to our third point.

#3: Make Sure It's Fully Legal. Even if you're totally ready and willing to exchange a service for another, you never want to end up in a situation where your barter deal could put you on the wrong side of the law. While this might seem to only apply to sex and drugs, there are actually plenty of morally shaky areas where bartering could get you into trouble.

For instance, many Instagram celebrities, wary of being accused of getting paid to push products, instead opt for barter arrangements that can land them expensive flights to Iceland, new cars, and even free rides on a chopper. But even if you try to set up a fair and legal exchange, it pays to be wary of deals that seem a bit too good to be true. Don't end up like all the Kardashian-wannabes on Instagram who are still trying to strike deals with Flat Tummy Tea despite the known health risks and AMA crackdown.

But even if you try to set up a fair and legal exchange, it pays to be wary of deals that seem a bit too good to be true.

#4: Have Your Lawyer Check Everything. We're not lawyers, and this shouldn't be taken as anything more than general advice, but because bartering can be a difficult thing to do legally and correctly, you should always make sure you enlist a qualified, experienced lawyer to help you draft and look over your barter agreement before you sign. If you want to keep yourself protected from scammers and con artists, having a lawyer is absolutely non-negotiable.

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