General
Why Written is Wiser: Part I – The Importance of Written Agreements
‘Twas not so long ago that a man’s word could be irrefutably trusted, a business transaction was reliably sealed with a solid, spittle-encrusted handshake, and honour was revered. Of course, it’s somehow so much easier to keep to the promises you made over a late-night game of poker when breaking your ale-infused word would result in a duel to the death at dawn or pistols at twenty paces. The law was so much simpler when “you break the contract, I break you” was a perfectly acceptable consequence of repudiation.
Compare this to the modern-day agreement-entering ritual: Your good friend approaches you with a business proposition. The details are a little sketchy at first because you haven’t yet signed an NDA. You peruse the NDA with a magnifying glass, taking great care to ensure that every clause is reciprocal (fair’s fair!) before signing. You receive a little more information. It sounds promising, so you agree to engage in negotiation. You arrange a few meetings (sticking to the herbal tea – you need a clear head) to thrash out the details. Then it’s time for The Contract. You each source a good attorney. Your attorney was recommended by your sister’s best friend. (“She did my cousin’s divorce. She’s a real tough nut, had the ex in tears in court!”) The next tricky hurdle to overcome is to decide which attorney will do the drafting.
Whilst you’d prefer for your attorney to do it, you fear that this will add a whack onto your legal bill. Eventually the drafter is identified and a draft contract is crafted. Then there’s the interminable game of contract-tennis between the attorneys as each clause is deconstructed and reconstructed until, finally, the fully indexed, multi-page masterpiece is ready for your million-dollar mark. You make every attempt to read it and soon discover that it makes for good bed-time reading: you’re asleep before you’ve made it through the first page. You source a good quality black ballpoint and two reliable witnesses to bear testament to your doing the deed. Then, and only then, are you both ready to pursue that promising proposition. Assuming the proposition is still promising after the weeks, possibly months that it has taken to finalise the contract. And assuming it’s still affordable after your wallet has been lightened considerably following your War of Words aka the contract negotiation.
When all is said and done, it’s little wonder so many give in to temptation and do business the old-fashioned way – on a handshake. Understandable? Yes. Ideal? No. In many cases overlooking a written legal contract is analogous to a hurricane amassing momentum. Such an oversight can ultimately wreak havoc in its deadly wake: failed deadlines, unmet obligations, unforeseen expenses, lost profits, ruined relationships and other business related carnage can cause untold problems.
There are many reasons why a written contract is always better than an oral contract. Here are just a few of those reasons:
Certainty
Having a written contract in place grants certainty that an agreement does, indeed, exist. While many oral agreements are enforceable, it can be extremely difficult to prove the existence of a verbal contract, never mind proving its terms and conditions. More often than not, the existence of an oral contract boils down to a “he said-she said” debate. Putting an agreement into writing eliminates the need to address the questions of “is there a contract?” and “if so, what does it entail?”
The Details
If you have an oral agreement, it is highly likely that some of the finer points will be forgotten with the passage of time. With a written agreement, there is clarity on the terms and conditions at any point in time. And it’s always possible to amend a written agreement with the consent of both the parties if circumstances change. Additionally, when entering into a verbal contract you may not think to raise issues that seem obvious to you – but these issues are not necessarily obvious to the other party. It is these issues that invariably create problems in the future when you try to enforce the agreement. Conversely, when entering into a written contract the parties involved usually exercise a greater degree of caution in their endeavours to include all the details, reducing the risk of disagreements in the future.
If you need even more reasons to convince you why a written contract is way, way better than an oral contract, stay tuned for our next installment!
Please note that this information is supplied for general information and does not constitute legal advice. It is advisable for you to contact a legal practitioner for guidance in respect of your unique requirements.