Reasons to use an affidavit in business
Most people are at least somewhat familiar with the term affidavit, which is a legal document with a wide variety of uses. While affidavits are certainly common in courtrooms and other legal proceedings, they are also very useful in the business world where they can be used in conjunction with contracts and other negotiation proceedings.
According to the second edition of American Jurisprudence, an affidavit is:
"Any voluntary ex parte statement reduced to writing, and sworn to or affirmed before a person legally authorized to administer an oath or affirmation."
A business affidavit is essentially the same as an affidavit used in a court or other legal environment. It is a written statement in which the person writing the statement "solemnly promises" that the information is true, under penalty of perjury. For an affidavit to be official, it must be completed in the presence of a witness authorized by law for this specific purpose (known as a notary).
An affidavit is a great way to ensure that the statements being made by whoever you are doing business with are legitimate, and that if there is any intentionally fraudulent information being given, you will have powerful legal recourse. The penalty for intentionally lying on an affidavit is the same as lying under oath in a courtroom. Perjury typically encompasses a hefty fine and often leads to jail time.
Types of Business Affidavits
The following are a few of the most common ways affidavits are used in business.
During any business negotiation, there is usually a lot of information passing back and forth between the relevant parties. Often, the price, time frame and other terms can be significantly impacted by the information provided by these parties. While it would be great if we could trust everyone in the business world to be completely forthright and honest during negotiations, the reality is that business is often a cutthroat environment, and some may choose to act unethically if they think it will provide them with a significant advantage, and if they believe they can get away with it.
Using affidavits to affirm that the information in specific documents is legitimate adds a level of protection for you and your company. If the other parties know there could be severe legal repercussions for lying in documents, they will think twice before doing so. It goes without saying that you must still do your due diligence, but an affidavit provides you with additional leverage if you find something that does not seem to be right.
Conversely, offering to sign affidavits for the information you provide during a negotiation can be a great way of building goodwill and trust with the other party and also sets a precedent if you decide you want affidavits from them.
Managing your staff is an important part of business and it helps to know that the people you are hiring or promoting are who they claim to be. While you should always use background checks on anyone you hire, a signed affidavit can provide additional protection. If you give employees access to sensitive documents, a signed affidavit can protect you in the event they defraud you and cause legal problems for your company.
Mergers and Acquisitions
Much like negotiations, M&As typically involve a lot of information being passed around. In addition, M&As can involve vast sums of money, the amount of which is largely determined by the information in transit. An affidavit can protect both you and the other party from false claims and provides a significant legal protection in the event of actual fraud.
These are just a few ways affidavits can be used to make your business stronger and more secure. Be sure to speak with a lawyer before proceeding with an affidavit.