In the course of business, it is tempting to take someone at their word without the written and binding formality of a contract. You should know: there are pros and cons to both oral and written contracts but for the most part, written wins!
Why oral or written agreement?
Oral contracts can provide ease, convenience, and flexibility for the day-to-day of your small business. Written contracts can take time, effort and cost, but provide for specific terms with little to no flexibility. If you intend on breaching a contract, it is better to be oral than written so your breach is harder to prove. For law-abiding citizens, a written contract is always better!
You should know: in a court of law, a written contract will likely prevail over an oral contract and any changes to a written contract need to be in the contract.
Some contracts MUST be in writing to be enforceable such as:
- Any contract for goods over $500
- Any contract that can’t be performed within ONE year
- Any contract involving land: leases, sales, sublet agreements
- Employment – Specific agreements with non-compete clauses or terms where the employee has restrictions upon leaving the company.
Contract: Best practices for your small business
- Draft templates (or Get Gadh App to do it) tailored to your business that allow you to plug in things like specific price, quantity and time of delivery for each of your transactions.
- Contracts don’t have to be complicated. A cocktail napkin can be an enforceable contract as long as it contains a clear description of each parties’ responsibilities.
Get it in writing to protect yourself!