Inquiry of the day: Hidden Defects
What does a Shotgun clause and a Muffin have in common?
The Shotgun Clause got its reputation from the abrupt way it puts an end to a partnership relationship.
How do I explain it?
Imagine there’s only one muffin left to share for your 2 kids.
One of the kids grabs it quick, but before he can eat it the parent cautions him to split it with his brother.
The parent adds a condition however:
« if Your brother prefers the piece you kept for yourself, he can take that one instead of what you offer him »
Now the child holding the muffin knows that his brother can take the bigger piece and must therefore reasonably split the muffin.
You see, the muffin represents the value of your business and the piece of the muffin offered by the child triggers the beginning of the end of a business relationship between partners.
Offer too little and you risk ending up with that small piece yourself.
Offer too much and you risk eating a pitance.
The shotgun clause puts an end to the relationship, with everyone eating reasonably.
Just make sure you’re using the right Muffin recipe.