WHY Written Agreement is Important in Business
A “contract” is a written or verbal agreement between two or more parties that is intended to be enforceable by law. For example, A is providing services to B, B agrees to pay a certain amount for the enjoyment of the services that A provide over a specific period.
A contract is formed between A and B even though there is no written agreement between the parties. If A or B fails to perform its obligations, the other party can sue. However, as there is no written agreement, the suing party will have to put some effort to prove the contract elements between parties.
This article discusses the importance of putting the contract in written form in a business transaction today.
A written agreement lay out the terms and condition of a transaction. Generally, it states the parties, the full job scope, including the procedure, the payment amount and terms, how the contract can be terminated, the effect of terminations.
Hence, the expectation for both parties can be written into the agreement.
Parties often go through a negotiation process to protect their interest before concluding a written agreement. The fundamental aim of putting a contract into written form is to provide each party with an opportunity to read through and have a clearer understanding of the terms and conditions after a thorough discussion.
Thus, good negotiation and well-written agreement can prevent conflicts and misunderstanding during the contract periods and sometimes even after the contract.
In addition, a written agreement serves as an official record of the business transaction. In the event that a party to an agreement breach the contract, the written agreement can be used as a reference on what the parties have agreed and determine who is at fault.
Further, it is much easier to resolve a dispute arise between parties when the written agreement includes a dispute resolution clause. Hence, with a written agreement, it reduces the chances of bringing the issue to the Court, which could be time-consuming and costly.
The most important is that the relationship between the parties will be broken.
Furthermore, a written agreement sets out the process of the whole transactions. It provides a guide to employees on their role and obligation, such as the completion date, the flow of works and other details.
As such, it mitigates the risk of non-compliance.
In conclusion, a written agreement plays an essential role in any business transaction. Besides making the parties legally binding to the contract, a written agreement can also provide a reference in the future.
The most important is that a written agreement can be a piece of evidence in the event of misunderstanding or disputes between the parties.
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