In the UK there are two legal definitions of insolvency. The first is where an individual or...
Having a contract in writing: why you need one and why it's a good investment
Many business deals are concluded by “Gentleman’s Agreements”. These can work for people and businesses - until there is an issue or uncertainty.
Unfortunately, deals and relationships in business can, and do, go wrong for many reasons. When they do, and if you need assistance from a solicitor, one of the first questions you’ll be asked is, “Do you have a written contract?”.
You might think “I have never used a written contract so why should I need to have one in place” or “I can put it in place later”. The risk is that without a formal written contract the actual agreed terms might not be clear.
This can be problematic because the circumstances can change, leading one party to claim something in the agreement that benefits them. This can be because memories fade and, unfortunately, people do lie. If the relationship does break down, it will be for a judge to decide which version of the agreement they believe.
Apart from avoiding litigation, there are multiple other reasons to invest in a written contract. A well drafted agreement ensures that all of the terms of your deal or relationship are documented. If there is any uncertainty as to what each party is obliged to do (or refrain from doing) they will be able to refer back to the written agreement. This will also ensure that they do not inadvertently breach the agreement. In short, a well drafted written contract can save money and strengthen a business relationship by ensuring all parties are clear about their rights and obligations under the agreement.
To achieve this, the rights and duties of each party should be defined clearly, with little room for misinterpretation. Issues such as time for performance, payment terms, termination rights (to name a few) should all be clearly documented.
When compared to the total value of all the transactions to which those terms will apply, and if you consider that any general terms of business created for your use are applied to every transaction you undertake with your customers, it is money well spent ensuring those terms:
- properly reflect the level of liability you are prepared to bear;
- if dealing with consumers, are in accordance with consumer law;
- are enforceable when you need to rely on them; and
- accurately record your terms for payment and rights in the event of non-payment (such as retention of title).
We assist businesses of all sizes with their contracts, whether terms and conditions or individual contracts, creating templates or bespoke agreements as appropriate to fit their needs and legal budget.
For a no obligation 15-minute phone call to discuss how we can assist you and your business to protect your deals and your business relationships, please contact me.