Why Even A Simple Contract Can Save Your Bacon

By Author: Molly Berton
Total Articles: 75
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Every business owner says it; "Do I really need a written contract?" The answer is "YES, YES and YES!" Using a written contract is like buying insurance for your business deals, but much better.
What Is A Contract?
To put it simply, a contract is definitely an enforceable agreement among several parties or at least two. The contract offers the guarantees of your parties to one another, and that is by law often known as "consideration". These promises express the relationship being undertaken as well as what happens if the business relationship fails or doesn't work out. If one party fails to perform according to their promises, then they have "breached" the contract and can be found liable for damages. The damages classically equate to what the non-breaching party would have received if there had been no breach.
Oral Contract v. Written Contract
An oral contract is an agreement made with spoken words and either no writing or only partially written. An oral contract is just as valid as a written agreement. The main problem with oral contracts is proving its existence or the terms. On the other hand, a ...
... written contract generally refers to a written document outlining an agreement between two parties. The parties can be individuals, businesses, or organizations. All factors or portions in the agreement must be included in the agreement, and each party involved has to sign the document in order for it to be considered valid.
To illustrate, here is an example. You go to a party with an acquaintance and there, you meet someone attracted in your product. Eventually, you decide to provide him with 1,000 units of your product in exchange for a discounted price. You have created what is known as an "oral contract." He has promised to order products and you have promised to provide them at a discounted price. Is the arrangement worth something? Unfortunately, the answer is perhaps no. Why? In most states, verbal contracts are not enforceable if they carry an inherent value in excess of $500. Since it is so hard to establish the terms of an oral contract in a dispute the legal system tries to discourage them. In fact, this legal restriction is generally known as the "Statute of Frauds."
Going back to our example, what if you thought you were going to give a 10 percent discount and he believed it was 20 percent? What if you can't resolve it and he asserts you provide the discounted products? You will end up in court with the argument coming down to which party the judge or jury be certain of. Are you really eager to take the risk?
With even a simple written contract, you can create a clause containing language that states you will give a 10 percent discount. If the dispute ends up in court, he is asked if his signature is on the bottom, the clause is read and you win. The contract should also contain a clause requiring the "prevailing party" to be reimbursed for their attorney’s fees and costs. In short, he has to pay your legal bills as well.
An additional benefit to using a written contract is the due diligence element. I realize you will be shocked to learn that there are unethical businesses. In negotiating a contract, very specific requirements are put in writing. What if the other party starts squirming? It may be a sign they are unable to meet their obligations. Might that give you pause before you commit to tying up your inventory? You can save yourself a lot of headaches by discovering this information in advance.
To sum up, even a simple written contract should be a mandatory bullet in your arsenal. Much like car insurance, you will be glad you have one if a business transaction falls apart.

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