Quid Pro Quo

We’ve all heard the term “quid pro quo,” but what does it actually mean? Well, it’s basically just a more fun way to say, “a favor for a favor.” Or, in Latin, if we want to get all official about it, it means “something for something.”

If Nick does something for Joe, then he expects Joe to do something for him in return. In the corporate world, a quid pro quo business agreement is akin to a contract, which means a court can decide it’s legally binding…or legally void, if it’s too one-sided.

For example, let’s say Nick owns a commercial fishing company and Joe runs a trucking business. One of Nick’s crews brought in a huge haul of lobster, and now he needs to get it from the docks in Maine to a bunch of restaurants in Vermont and New Hampshire. Unfortunately, the trucking company he usually uses is on strike, and now he has a million live lobsters and no way to get them to their final destinations. Enter Joe, who says he’ll gladly use his refrigerated trucks to haul Nick’s lobsters all over the northeast…as long as Nick agrees to give him 1,000 shares in Nickfish, Inc. “Fine,” Nick says. He’s not thrilled with the deal, but man, does he need those lobsters delivered ASAP.

Anyway, fast-forward two weeks, and despite Joe’s fresh and on-time deliveries of Nick’s lobsters, he still hasn’t received his Nickfish shares. He’s feeling pretty miffed, so he decides to take Nick to court. They don’t have a signed contract, but Joe is sure their quid pro quo agreement will stand up in court. It’s determined that the value of the lobster sales Joe saved is worth about $5,000, but that the value of 1,000 shares in Nickfish is worth $12,750. That’s a big difference, and in this case, it looks like the judge is going to rule that the quid pro quo agreement is void. But if those shares had only been worth $5,000 total, there’s a really good chance the court would have instructed Nick to pay up, even without a signed contract.