1 September 2017 | Reading time: 2 minutes
We all love a handshake agreement. Sometimes, even a hug. But, dependable relationships can become a source of constant headaches and nuisance when things turn sour. With the benefit of hindsight, you may wish you were better prepared with a well written contract.
Here are 5 basic reasons in support of documenting your ‘handshake’ in writing:
A written contract holds the parties accountable to a set of expectations and deliverables. It creates certainty for the parties by detailing:
2. No surprises.
A written contract creates trust between contracting parties. If a party is unwilling to provide a written contract, then don’t be surprised when the party fails to perform its obligations when the time comes.
Although an oral contract can be enforceable, a written contract can be enforced more effectively. It can be difficult, time consuming and costly to establish each party’s rights and obligations under an oral contract and therefore courts are reluctant to enforce the terms of such contracts. Especially where the contract is unclear or incomplete.
It is essential that any commercially sensitive information (eg information that could cause harm if disclosed to a competitor) disclosed to party during the course of negotiations or the performance of contract, be kept confidential. Parties can be held liable for misusing confidential information, if each party’s confidentiality and non-disclosure obligations are clearly outlined in a written contract. Inadvertent disclosure can also be avoided by clearly defining what information is confidential.
5. Getting out of a hairy situation.
A written contract is an official record setting out the terms agreed by the parties. If a disagreement or dispute arises between the parties as to the terms of contract, the parties can turn to the written contract in order to resolve any misunderstanding. This can save money by requiring the parties to follow a dispute resolution process (eg conciliation or mediation) rather than resorting to costly litigation.
We like handshakes.
‘Handshakes’ should be documented via a detailed, well written and unambiguous written contract. This will likely result in numerous practical and cost-saving benefits in the future. Most importantly, it will help prevent disputes. Reach out for a handshake with a Bespoke lawyer to make sure that your business transactions are documented in writing, because remember: the devil is in the details!