Almost every organisation uses contracts in the management and running of a business. A contract can relate to a business buying goods or services, supplying goods or services and partnering with other organisations.
Even though a contract can be either written, verbal or a combination of the two, it is advised that you have a written contract. This is because verbal contracts rely on the good faith of all parties, are open to misunderstandings and can be difficult to enforce as the commercial terms may be uncertain.
Why Have a Written Contract?
In addition to verbal contracts exposing your business to more risk, there are five other reasons why having a written contract is important.
- A written contract provides the terms of the contract. These determine how the agreement is to be fulfilled. Although there are some exceptions, the law does not specify the terms of a contact – they are up to the parties to devise.
- A written contract specifies the nature of the agreement being entered into. It will clearly set out what is to be done by whom and when. It will also plainly identify the price, the timing and method of payment.
- A written contract specifies the meaning of key words understood by the parties. The agreement will use key words to describe practices and processes relevant to the trade or industry of the parties. The precise meaning of these words is vital to satisfying the contract and needs to be defined.
- A written contract clarifies what constitutes satisfactory completion of the contract. A written contract therefore clearly sets out the expectations of the parties before the work begins.
- A written contract provides how disagreements between the parties are to be resolved if they occur. Disputes arising under the contract may either be negotiated by the parties themselves or by a mediator, or by a court or tribunal.
As has been shown, it is recommended that you have written contracts for your business. This will minimise your risks and help to prevent disputes by clearly setting out the terms of your agreement.
To speak to a lawyer about drafting a contract for your business, call Vault Legal today on 1300 002 212 or email us at email@example.com.
Key words: contract, terms, agreement, dispute resolution and trade.