The amount of business that gets done on the back of a napkin or with a handshake is staggering…and it happens all the time, every day, in every industry. With all this business going on without contracts, we often get asked if they really need to go to the time and expense of creating a contract…especially for the “simple” things in business.
This thinking is dead wrong.
Contracts build Trust
First of all, contracts don’t replace trust, they build it. When there is a contract in place things happen in the way they should and trust is built throughout the transaction. Trust is built on certainty, not uncertainty. And when there isn’t a contract in place the outcome is left to the interpretation of the individuals involved. And as we all know, we all interpret the same sentences and content differently. You can build much more trust when there is some commonality that all parties are working towards throughout the course of the contract.
Contracts remove uncertainty
Secondly, they remove the uncertainty that might come up after the handshake has happened. Now instead of thinking things are one way, they are written in a way so that everyone knows exactly what is certain and defined by all parties. Similar to trust, it helps strengthen the working relationship between all the parties so they can focus on what is defined, not supposed to happen.
Contracts provide necessary details
Thirdly, the “devil is in the details” as we all have heard. This simply means that the real execution of something is going to happen when the details get spelled out. With a handshake or the napkin, only a certain level of detail can be listed. This is much too high of a level for something significant to be laid out in detail. With a contract, the details are listed out so all parties can see exactly what each other is going to do and what they are responsible to do as well. Now the details get discussed before the deal is made and everyone has the option to bow out when they are finally on paper.
Contracts help eliminate disputes
Fourthly, contracts help down the road in case there are disputes. While many deals are executed smoothly, there are many that aren’t. For those that don’t go as smoothly, it is great to have a contract in place to review as to what everyone agreed to in the beginning. There is no question that a well-written contract can save you thousands of dollars if there is ever a disagreement or dispute sometime down the road. Think of a contract as a tremendous insurance policy in case something goes wrong.
Contracts help when relationship ends
Finally, contracts are great when it’s time to move on from the relationship. Usually when someone moves on or wants to exit the contract there are many issues to be discussed. Things are the same as they were when the agreement was first made. Because things aren’t the same now as they were then, these changes have to be discussed and agreed upon. It is much easier (and fairer) to discuss this in the beginning than in the end when one or more parties want to exit the agreement. If these are listed out in the beginning of the arrangement, everything goes much smoother (and less expensive) when it’s time to call it quits with the relationship.
There you have it…some key reasons why you should think about putting a contract in place for just about everything you do as a business owner. OK, maybe not everything, but a lot of what you do should have contract to back it up. Contracts don’t have to be something really complex full of page after page of legal jargon…they can (and should) be simple and straightforward. They should be something everyone can understand so there isn’t any ambiguity down the road. This should be a normal part of your business and one that happens whenever there is a “deal” or an “arrangement” or an “agreement” with another party.
When we first created Your Concierge Counsel℠ this was one of the areas we knew would be a hot button and huge advantage for our clients that used this service. Why? Because there were lots of times they should have had a contract in place and didn’t because they thought it would be a hassle and expensive to call their attorney and get it drafted. We’ve eliminated that with this service. Now when they should have a contract in place they simply make a call and we get one drafted as part of the ongoing relationship. Whether you use Your Concierge Counsel℠ or something else, get the contracts in place.
What to do next…
As part of our legal services for businesses, we can provide guidance to help you navigate through the world of contracts. This is actually one of our specialties and an area we have extensive knowledge and experience…from both the creation side and the litigation aspect. But whether you use us or not, the key is to get in front of a competent contract lawyer and have them help you through this process…on just about everything so you can avoid any potential issues in the beginning, middle, and ultimately in the end.
If you ever have any questions about Family and Medical Leave or any other aspect of your business, just ask and we’ll be happy to answer them. Or if you just want to better understand how you can minimize and lower your risks (which every business owner wants) then please read some more about risk management and how you can help determine your own risk. I’d also be happy to meet with you (complimentary of course) to discuss your own personal situation further and give you some insights about how you might want to proceed.
I hope you have found this helpful and given you a different way to look at your business. If it has, please share this with others inside your company and your colleagues who are running or leading other businesses. Our primary mission at Generations Law Group, LLP is to help everyone find productive ways to lower their business AND personal risk. This is just one way you can start to do this…but it will tell you a lot about you and what has happened over the past few years with regard to your business risk. Let’s make sure your risk is as low as it can be while you continue to grow.