Write it Down! Why written contracts are important

Some verbal contracts be valid even if they have not been put in writing. However, written contracts have several advantages to verbal ones. They will more clearly set out each party’s rights and obligations, accurately document their true intentions, provide a reference point to resolve issues efficiently and define the mechanics of the business deal at hand. Importantly, written contracts help avoid protracted and potentially costly disputes.

Certain contracts are not valid unless they are in writing.  Contracts relating to the purchase and sale of land need to be writing down. This is a law that has been in force for hundreds of years!

If you need another reason to get a written contract, consider this example.

You enter into a handshake deal with a customer, John. John is one of your oldest clients, and you are comfortable extending him significant amounts of credit. You know he is always good for it. One day, John passes away and his daughter, Susan, whom you have never met, steps in to administer his estate. When you send her the account for the last two months, she refuses to pay it because she knows nothing about this arrangement.

You now have an uphill battle proving that you are entitled to the amount in the account. While you might trust someone stand by your agreement, do you also trust their executor, personal representative, and attorney, or the bankruptcy trustee chosen by their creditors? The person you choose to do business with might not always be there, and a written contract ensures your agreement stays the same, even if the parties change.

The advantages of writing

There is just something about the act of writing an agreement down that forces you to think about the situation differently.  This is true of anything you write down.  You can more easily see where you have forgotten to think about something, or where some ambiguity in your agreement is.  If you work with a lawyer this is especially true. Lawyers are trained to ensure all the important parts of an agreement are documented. Often they will point out things that the clients did not think of.  The more complete your agreement is, the less likely you will end up in a disagreement with the other party down the road.

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