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When a Business Contract is a Good Idea

Aug 08, 2016

In the United States, an amazing number of businesses launch each year – over 6.5 million , according to Forbes. It’s important for all new business owners to protect their legal rights!

For many people, “their word is their bond.” Being known for honesty can create a sterling business reputation. Still, there’s more at stake in any business agreement than reputation – if a deal goes sour, your enterprise could be at risk.

Because the stakes are very high, it’s critical to recognize when a business contract is preferable to a “handshake.” A verbal agreement is legally binding, but it leaves business owners at a disadvantage: How can you prove what was agreed upon?

In many cases, you can’t… even if you have a witness.

When should you opt for a business contract instead?

When the Terms of the Agreement are Detailed, Always Write Them Out

Oral agreements are best for activities that are simple and immediate. If you agree to trade your toaster for your friend’s microwave, the deal can be enacted immediately. The contract is validated since both parties take action promptly, accepting the traded goods.

This is not the case in most business-to-business agreements, so terms must be much more precise.

If requesting a formal business contract is impossible, you still have opportunities to protect yourself. Correspondence, including hand-written letters, emails, and faxes, can be used to establish the details of your oral agreement in court. Once an oral agreement is concluded, consider following up with a “thank you” letter that restates the terms clearly.

The Law Requires Some Contracts to Be Written

Most agreements can be oral. However, each state has a statute of frauds clarifying which contracts must be in writing to be enforceable. The purpose of contracts is to define duties and protect rights, so any contract that cannot be enforced is worthless.

Contracts that usually must be written include:

  • Contracts that will require a year or longer
  • Contracts on real property, including leases
  • Contracts to guarantee or pay another’s debt
  • Prenuptial agreements
  • Contracts relating to the sale of goods valued $500 or more

Help from an Experienced Business Formation Law Firm in Palm Beach

Need a business formation lawyer Palm Beach, Florida, trusts? First Legal can help with expert advice to get your business off to a strong start. Like you, our team believes integrity and transparency matter. For immediate help, call us at (954) 998-1488.

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