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Signature vs. handshake: The importance of a contract

As your business grows, you are probably dealing with more entities each year. In addition to customers, you have new suppliers, vendors and subcontractors who depend on you to deliver your services in a timely manner. Maybe one of your goals as a business owner was to maintain a casual, approachable image, and you have managed this by keeping your word and accepting the word of others.

Now, however, you may be wondering if that method of doing business is practical anymore. While a handshake may have worked to seal your agreements in the past, you may suspect that you need more protection as you move toward larger ventures.

The value of the written contract

Verbal contracts have their place. You may not want to ask your mother-in-law to sign a contract when she asks you to repair a leaky pipe. Similarly, you may have longstanding relationships that could incur damage if you suddenly require a signature rather than an oral arrangement. It will be up to you to weigh the pros and cons of certain situations, and you may even seek legal counsel.

Nevertheless, an oral contract is difficult to defend in court. If a customer sues your company for breach of contract, there are two common ways to prove your agreement:

  • A witness was present when you agreed on the contract.
  • The exchange of goods or services for compensation occurred.

Witnesses, if any were present, may not be reliable, and if the quality of goods or services is in question, the course of conduct may not be adequate to defend you. To avoid these kinds of disputes, advocates for both entrepreneurs and consumers recommend a solid, written contract.

Finding what works for your company

Maybe you have heard of other contractors or business owners who have gone through the frustration and headache of litigation following a misunderstanding based on a verbal contract. On the other hand, maybe you have gone through it yourself. While you may feel awkward presenting a contract to someone with whom you've had an amicable business relationship, you may have concluded that a written agreement is the best way to ensure there is no confusion.

Drafting a rock-solid contract is a complex endeavor, but taking steps to work out the agreement ahead of time may save you the effort and anxiety of preparing a defense to take to court when your client disputes the terms of your verbal agreement. To ensure your document meets your goals, you may obtain the assistance and guidance of an attorney who has decades of successful experience in business law.

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