Not so long ago, many business owners and individuals relied solely on oral agreements sealed with a handshake. However, today’s litigious society makes relying on unwritten accords unwise. Doing so has the very real potential to financially ruin your business.
The Disadvantages of Oral Contracts
As an entrepreneur, you may have agreements with a number of parties. This is particularly true if you are in fields such as general contracting, construction or product repair. You may have long-standing relationships with your vendors that make the idea of a written contract seem irrelevant, but here are three good reasons why it is not:
- The details of the agreement may not be clear, or one of the parties might forget what was agreed to.
- Circumstances in business and in people’s lives change. When there is nothing on paper, your agreement may well crumble.
- An oral agreement is often not legally binding and is frequently difficult or impossible to enforce.
In many states, you have less time to file suit if an oral agreement is broken than you would if it was written down. In addition, verbal agreements are notoriously slippery, often turning into an impossible-to-prove “he said she said” that ends up depriving you of the justice you deserve.
Many businesses rely heavily on independent contractors to perform services for their customers. Having agreements in writing with these people – no matter how well you know and trust them – is crucial. That’s because when injury or other tragedy strikes and you do not have a written contract combined with an excellent general liability policy, you could be left holding the bag. That means that you might be financially responsible for the person’s state and federal employment taxes, workers’ compensation, Medicare assessments and interest and penalties.
Get it in Writing
Although it might seem time consuming and expensive to hire an attorney who can help you craft a solid contract, it is definitely worth it in the long run. No business owner wants to suffer the financial and emotional stress of a protracted lawsuit, and that is exactly what might be in store for you if you don’t capture all of the details clearly in a formal accord. Feel free to shake hands to seal the deal as well, but never underestimate the importance of a written contract. It is a vital safety net in today’s lawsuit-happy business climate.