The Importance of Written Contracts: Why Business Owners Should Always Use Written Agreements

As a business owner, you may have been approached by clients, suppliers, or partners who suggest making verbal agreements or understandings rather than using written contracts. While this may seem like a convenient way to do business, it can expose you to significant risks and legal challenges down the road.

The Legal Validity of Verbal Contracts

Verbal contracts, also known as oral contracts, are agreements made through spoken words rather than written documents. While verbal contracts can be legally binding in some circumstances, they are not always enforceable.

In most cases, verbal contracts must meet certain legal requirements to be valid and enforceable. These requirements include:

  • Offer and acceptance: Both parties must agree to the same terms of the agreement.
  • Consideration: Both parties must exchange something of value, such as goods or services.
  • Intention to create legal relations: Both parties must intend to create a legally binding agreement.
  • Capacity: Both parties must have the legal capacity to enter into the contract, meaning they must be of legal age and sound mind.
  • Certainty: The terms of the agreement must be clear and unambiguous.

If any of these legal requirements are not met, the verbal contract may be considered void or unenforceable.

The Risks of Relying on Verbal Contracts

Business owners who rely on verbal contracts expose themselves to significant risks and legal challenges. For instance:

  • Misunderstanding and disputes: Verbal agreements may lack clarity and specificity, which can lead to misunderstandings and disputes over the meaning of certain terms.
  • Lack of evidence: Verbal contracts may be difficult to prove in court because there is no written record of the agreement.
  • Unclear terms: Without clear terms, parties may have different expectations about their obligations under the contract.
  • Liability: Business owners may be liable for damages or losses resulting from a breach of verbal contract, even if they did not intend to violate the agreement.

The Benefit of Using Written Contracts

Written contracts, on the other hand, provide several benefits that can help business owners avoid legal and financial risks. Some of these benefits include:

  • Clarity and specificity: Written contracts provide clear and specific terms, which can reduce the likelihood of misunderstandings or disputes.
  • Legal protection: Written contracts can provide legal protection and limit liability in the event of a dispute.
  • Record keeping: Written contracts provide written record of the agreement, making it easier to prove the terms of the agreement in court.
  • Customization: Written contracts can be tailored to meet the specific needs of each party.

Working with an Attorney to Draft a Contract

In today’s business world, legal disputes and challenges are more prevalent than ever before. Working with an attorney to draft legally binding contracts is not only important but also necessary to protect your business interests. An attorney can help you avoid the pitfalls of verbal contracts by drafting clear and specific written contracts that meet the necessary legal requirements. This way, you can rest assured that your contracts protect your rights and interests in the event of a dispute. Do not wait until it is too late to seek legal guidance – take action today to protect your business with written contracts prepared by a knowledgeable attorney.


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