We hear it all the time. ‘We don't have signed contracts in our business. We have never needed them.'  

But using written contracts prepared by a lawyer in your business can save you time and money in the long run.

Imagine this: there is some kind of dispute between a business and a customer or a business and a supplier. Someone is not paying; or maybe someone is not happy with a product or service.

The business owner must now trawl through their emails and text messages. They are looking for any written evidence of the agreement that has supposedly now been breached. The business owner is also trying to recall conversations of what was said many months earlier. They may even be questioning if their memory is wrong. 

This is a very common scenario we see with small and medium business owners. It is not a fun place to be. 

Imagine the flip-side. A dispute arises. Payment has not been made and is late. However, in this scenario, there is a signed written contract prepared by a lawyer that clearly sets out the obligations and requirements for the transaction. The business owner can now use this lovely, documented roadmap of what the parties agreed from the outset to help resolve their contractual dispute.

While not every business dealing will result in a dispute, having a written and signed contract is a much easier and clearer point of reference for the deal struck compared with email and text message exchanges or memories of conversations.

We look at this further below with our top 3 reasons you should use written and signed contracts prepared by lawyers to supply or purchase products and services in your business. Read to the end to see the one that is probably the most important to your business. 

1. Clarity leads to less disputes

As already touched on, having a clearly drafted contract in your business can drastically reduce the amount and impact of disputes.

A good contract you understand can give your business and your customers or suppliers a clear set of expectations at the outset. Both parties can refer to the contract to understand their responsibilities and expectations at any time. This helps to reduce misunderstandings and can prevent disputes before they arise.

In the event there is a dispute, a written contract provides evidence of what the parties initially agreed. This helps make your rights easier to legally enforce and disputes easier to resolve.

Verbal or less formal agreements, on the other hand, can be challenging to prove and enforce. This due to the lack of clear written evidence or documentation of what terms and conditions your business agreed. ‘Strangely' recollections of what was verbally agreed can differ greatly as soon as a dispute or disagreement arises. 

2. Risk Management

Contracts can help you manage risk in your business sales and purchases. This can be done by including terms and conditions that:

• clarify the scope of work, define services or goods and set each parties requirements.
• protect you from non-performance or failures, such as failures to deliver or meet quality standards.
• address or reduce potential liability costs in the event of your own non-performance or failures.
•  include the rights and process for ending the agreement or resolving disputes.

Knowledge is power. A contract gives your business knowledge of the obligations and the consequences for failure to meet those obligations. This means your business can implement compliance processes and policies that help it avoid breaching a contract.

3. Getting paid

Getting paid for the products or services you sell is probably the most important reason to have a written and signed contract.

Having clear payment terms in a written contract for when and how much you are getting paid is extremely important for receiving payments on-time and protecting your businesses cash flow.

Even better is also including incentives for early payment or consequences for late and non-payment. This can encourage and give you rights to enforce payment in full and on time. It can also protect you from the costs to your business when customers or clients fail to pay.

Need a contract for your business?

SLB Legal specialises in drafting, reviewing, negotiating and advising on contracts for small and medium business. 

Click here and book a free 15-minute call with us today to discuss how we can help with your business contracts.