Why Written Contracts are Necessary for Business Transactions?

You may think of written contracts only done with big business deals. That there will be no trouble  when you’re dealing with friends or trusted colleague, because you might think that oral contracts are enough and since they are your friends or long-time colleague.

I have, to my surprise, run across several, many of whom successful and experienced small business owners, who seem to be lax about getting business agreements without written contracts. One of the most common reason is the other party is a close trusted friend, that the owner has worked with several times and has proven to be honest and trustworthy. So you both just simply close the deal with a handshake. It could be that the owner (you) are right and things will flow smoothly, only to realize that one misunderstanding will cause financial, time and emotional stress.

Imposing written contracts didn’t mean dishonest and distrust to your business client or partner. I have seen several disasters resulting from poorly written and only handshake agreements that even result to broken relationships, while good written contracts save money and surely will strengthen business relationships. Do you agree? Let’s see.

First, written contract helps you organize and specify in details and clear the terms and condition of both business parties. You would want to make things happen smoothly and of course peacefully between you and your client or partner. So, you’ll hammer out an arrangement on a couple of big issues and must put the deal together. Believe me oral contracts can be dangerous, that’s why written contracts are necessary even with your most trusted friend, why risk having a fight because one of you thought that the payment is within thirty (30) days and the other thought it was in forty-five (45) days?

All of us are generally nice and want to do the right thing. However, the reality is that large bulk of argument is based on misunderstanding with each side being convinced that they heard and understood the agreement in the right manner. As a matter of fact, a lot of contract disputes are among family members and friends believing that the strong relationship before the agreement results to strong understanding and it wouldn’t hurt any future relationship as well. Only to realize that it’s the other way around.

Second, written contract provides the both parties anticipation, framework for determining and negotiating possible future pitfalls through proper review and evaluation of the agreement. In addition, written contract makes both parties more serious about their business agreement and actions. Through enforced written contract, both business parties will most likely be honest and trustworthy in delivering their promises. Schedule is followed and decisions are organized, which actually be cost, time and effort effective and efficient.

Finally, a written contract would absolutely be tucked away in the filing cabinet especially when things are going according to agreement. But, when a problem arises, both parties can always review their prepared written contract and problems could be easily solved. And, when someone sues you regarding the business you undergone, the written contract you have made will be your primary and best defense. But, only if the written contract is complete, detailed, clear and properly written agreement. However, if you have poorly written contract then the other party might get the upper hand.

For better results and well done written contract, getting lawyers involved is recommended. They know better than you do in business law especially getting your written contract perfectly done. Choose a good lawyer to help you navigate through some more complex parts of an agreement, especially lawyer who is a deal-maker and not a deal-breaker. Remember, not all lawyers could be helpful to you. Choose someone who will clearly understand and prioritize your contract, especially the necessary matters that must be present on your written contract.

Remember, all business transaction needs written contract / agreement. Even with micro business, small business or small deals. It is for your safety and organization of present and future business needs.

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