“I am too busy running my business, so I really do not have time for complex paperwork” or “We work on the basis of trust”. Does that sound like you?
Pressures of business can often result in work starting on the basis of a verbal agreement with the intention to sort out a formal written contract as work is carried out. Doing business on this basis is never a good idea.
Misunderstandings and disputes can easily occur because of lack of documentation regarding the matters agreed. Also, it easy to overlook some matters if they are not properly recorded. As time passes, there is also the problem of trying to work out exactly what you agreed or have not agreed.
You may think that verbal arrangements save time. Unfortunately, in the long run they can waste time and money. If your client takes you to court over a dispute which is rooted in a verbal agreement- you will be too busy dealing with the court case to run your business properly!
Great relationships of trust can break down because one person leaves their company and their replacement may know nothing about the “relationship of trust”. Whilst it is important to have good business relationships, routinely working on this “trust” basis is just not professional or sensible. The best of friends can have huge disagreements and never speak again. This can also happen with your business relationships.
If you are a small or big business, written contracts are essential.
Written contracts can help protect your business:
- by providing written evidence of the matters that you have agreed with your client or supplier
- by clearly describing the obligations of the contract parties and remedies in the event problems occur
- by setting out the circumstances in which the contract can be terminated
- because you can include a clauses in your contract which clearly deal with your specific requirements e.g. payment terms, limits of liability, confidentiality and ownership of intellectual property rights.
You can adopt simple contracting procedures which are integrated into your business. For example, include your standard terms of business in any quotation or proposal you send to a client. Make sure your client accepts your quotation and terms before you start work.
Also contracts do not have to be long, complicated and written in 16th century English!
If you do use standard written contracts for your business, it is a good idea to review them on a regular basis. Your business may have changed or there may be new laws which affect your standard contracts. If you have not reviewed your standard contracts for a few years- it is time to have a fresh look at them.
