Why Your Business Needs a Written Contract
Written contracts are not just fancy agreements for big corporations. During uncertain economic times, lawsuits escalate and plague small businesses. Running a business based on informal agreements and implied arrangements can result in legal and financial disaster. Now more than ever you need to put everything in writing.
- 1. You keep your business protected with written contracts. There’s nothing more frustrating than knowing you’ve agreed upon something and having no way to prove it. Whether it’s with your business partners or clients, if you make an agreement, you need it in writing. Although businesses often make verbal agreements, such informalities often hurt your interests if conflicts arise. Resolution usually involves a game of “he said, she said” and these conflicts damage the integrity and trust in a business. On the other hand, written contracts prevent misunderstandings and conflicting memories. Your business interests are not compromised because they were clearly spelled out in a written contract. For instance, if you and a client sign a written contract with a term for penalties on late payments, you will have a much easier time enforcing penalty fees if they arise. However, if you and your client orally agree on payment terms, you may not think to discuss late payment penalties or the client may be unwilling to pay penalties by backtracking on what they said. Written contracts protect your business interests and maintain good relationships with those you work with.
- You’ll be better prepared in a lawsuit. No one wants to be caught in a lawsuit. But if it happens, the last thing you want to be is unprepared. Having your contracts in writing will leave less room for debate. If you spell out the terms of your agreement, you will be able to protect your interests and not fall victim to unfavorable legal interpretation. In court, you look more favorable if you’ve done your due diligence by running your business with written and enforceable contracts. Although courts may consider implied contracts or oral agreements, these never carry as much weight as a written contract. One of the best ways for you to protect yourself in a lawsuit is to have everything in writing.
- 3. Your business will look more professional. Small businesses especially want to put their best foot forward and look business savvy. One of the best ways to do this is by enforcing written contracts. This leaves people with the impression that you know what you’re doing. And just like you, other businesses and clients want to know they can trust those they work with. Clients and partners will appreciate your adherence to rules and guidelines. Having others sign documentation lets them know that you are serious about your working relationship with them. Also, when you demonstrate professionalism by asking for agreements in writing, others will be less likely to push business boundaries. You will be able to set a standard with your clients and everyone you work with and hold them to those standard, even if it requires taking legal action. Others will understand that you are running a straight shop and you and your business should be taken seriously.
- 4. Your business will run more efficiently. Written contracts are necessary to run a small business efficiently. Written contracts serve as a point of reference for new clients or business partners. You will be able to use your contracts as future templates to keep consistency. For instance, if you have a written contract with one client, you can refer back to it to determine what you should charge other similar clients. If clients or vendors have questions during a project, you can easily look back to the contract for answers. Without written contracts, you are left to recalling details from memory and you end up wasting a lot of time and energy.
Here are some tips:
- 1. WRITE IT DOWN IMMEDIATELY. If you’ve negotiated an agreement, get it in writing right away. Don’t stall or you may forget details. Make sure the other party has the opportunity to look through it and sign it to make the contract enforceable.
- 2. BE CONSISTENT. Don’t pick and choose when and if you want to use a written contract. For instance, if you use a contract for one vendor, use it for all vendors.
- 3. BE CLEAR. When you write out the terms of your written contract, avoid being ambiguous by spelling everything out. If you are drafting a sales contract, be sure to mention all the terms, including cost, delivery, penalties, etc.
- 4. USE TEMPLATES like the ones available on DocStoc, to help guide you in your contract drafting process.