How often do you trade on the strength
of an email, phone call or handshake?
Have you ever had contract disputes, or
have you got away with it so far?
You could never buy certain items without signing a contract e.g. a house or a car. Why should your business be any different?
If you trade without a written confirmation of the trade itself, or of your relationship with your customers or suppliers, you are likely to be storing up potential problems and leaving yourself open to uncertainty around productivity, performance and price.
Having a decent set of terms and conditions or robust contracts in place removes so many potential pitfalls.
Let us have a look at the top ten advantages of having something in place.
If you are relying on or supplying the provision of goods or services (to business or consumers), surely it is better to have written details rather than just making assumptions? Rather than suffer through the confusion of wondering what each party’s responsibilities are, it is surely best to see these recorded in black and white. This will help avoid confusion or disagreement and is especially useful in warding off contract disputes.
It is so disappointing, annoying, and potentially costly when one party to a contract tries to back out or change its terms – especially if it is the price. A written contract will bind the parties to the duration of the obligations – price included, and the problem is therefore eliminated before it started. Obviously, it may not just be the price but anything ranging from the timetable of delivery to quality.
If you trade with the public, you may well be subject to regulatory standards around fitness and quality. You may also be trading with credit or have to refund certain items in certain circumstances. It is healthy to ensure that what you are doing is compliant and limits your responsibility to the minimum required. A lack of written terms or the presence of unfair terms can result in increased consumer liability.
This might sound obvious, but a contract will stipulate the payment amount and when it should be paid. This helps ensure payment actually happens. If for any reason, payment does not happen, the contract is evidence of the business performed and the monies owed. You could insert an interest obligation on late payments to compensate you for late arrivals of monies due.
Trading is not always a bed of roses. Individuals may not see eye to eye or there may be external factors which affect the relationship. The existence of these issues could potentially sour the relationship and affect contractual performance. However, if the obligations are written and agreed, you have the comfort of being able to rely on the agreement. If your relationship needs to terminate, the contract should dictate how this is achieved. Major contracts may have facilities for conciliation or arbitration. In which case, the trading continues whilst these problems are being addressed.
7. Protect Your Intellectual Property and Customers
Protecting your business and its assets is extremely important. Intellectual property is an unbelievably valuable asset of any business and can come in many forms. IP needs to be protected against theft or misuse and copying. How damaging will it be if your competitor somehow ends up with your IP or client list? What if a customer of yours goes to a rival and informs them of your inner secrets and pricing or poaches your staff even? A good contract will contain restrictions preventing this from happening.
A handshake or email does not protect either party from liability – in fact, they probably award each party the privilege of unlimited liability – so dangerous! A good contract should consider liability and reduce and limit it where appropriate.
By putting a contract in place, both parties will have peace of mind, allowing the trading relationship to develop more healthily as both sides know exactly who should do what and when and to what quality or performance. It helps the relationship flourish if everyone knows and appreciates suitable protection is in place. For example, the contract may require your supplier to have suitable indemnity insurance to cover those risks that no one thinks will happen but just might?
They come in many forms. Contracts are not simply for trading. Think of employment contracts, shareholder and partnership agreements (including Limited Liability Partnerships or LLP ones), website terms and conditions. They are all contracts of some kind and are there to protect those who sign them!
There will be a cost of course in setting up a contract but the fallout risk of a trading dispute without one will surely outweigh this massively. However – remember that we at Everyday Legal provide easy to find quality templates at considerably cheaper prices than the traditional legal market.
Why not have a look at our broad ready-made template selection. They cover a host of scenarios and are taken from years of experience.
We also write numerous tailor-made contracts and agreements for our business clients who have requested something unique to their requirements.
We are here to help – use our contact form to get in touch.
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