Contracts: An Important Tool for Protecting Your Business

In each commercial transaction, a written contract is essential. Contracts can serve as future references, part of the company’s policies, and proof in the case of misunderstandings, complaints, or in defense of claims in lawsuits. If you’re preparing to start a business or enter into any form of contract with a person or company and want to be sure everything is legitimate and transparent.

Why are written contracts important?

Aside from having proof to point to during litigation, having a written contract has numerous other advantages. A written contract guarantees that you have documented all of the details of your agreement. If there is a conflict, the parties will have a document to refer to restore the relationship. In summary, a well-written contract may save money while also strengthening a business relationship by preventing litigation. In this article, our experts will discuss some of the primary reasons why contracts are such a crucial subject for a business:

Legal safeguards

One of the most significant features of a written contract is that it protects both your business and you from liability. No one likes to bear the financial burden of a lawsuit, so including legal safeguards in a contract is a good idea (such as attorney fee provisions). Put any insurance requirements in writing, and make sure the other party understands what they must furnish and who must be named as an extra insured (if anyone).

Requirements under the Law

Most jurisdictions demand a contract when the sale of goods surpasses $500. Employee hiring, the exchange of items or services over a specified price number, real estate, car purchases, or agreements lasting longer than a specific time frame may all require a contract.

Written Contracts aid in the avoidance of misunderstandings.

Any business transaction, including product sales and service delivery, is governed by the terms and circumstances of a business contract. This aids the parties in avoiding any misunderstandings that can develop if there isn’t a formal contract in place. It’s much more crucial to develop a formal contract if you’re cooperating on a new business with a buddy. This can help you prevent misunderstandings and, as a result, rifts that might lead to the end of your friendship. If you have an oral agreement, the passage of time may cause you to forget some of the topics you agreed on orally. A written agreement, on the other hand, makes all of the terms and conditions obvious at all times. And you may always change the agreement with both parties’ assent.


Not only is it a good idea to obtain contractual agreements in writing, but some contracts are required to be in writing to be enforced. Contracts for the purchase or sale of houses, buildings, lease agreements for more than one year, and agreements to pay another’s obligations are just a few examples.

Written contracts serve as proof of specifics.

This is one of the many reasons why a written contract is necessary for your business or any type of contract – it can legally serve as proof of specifics on whichever you and the other party have collectively decided upon. It lays forth the final understanding of a contract between a company’s owners or investors, whether it’s for services delivered by a third party or payment responsibilities to your employed staff. As legal evidence, all of this should be contained in the written contract.

However, in exchange for an agreement to serve these functions, it must be comprehensive. Each party’s rights and responsibilities should be clearly specified, with limited space for interpretation. Time for completion, payment conditions, termination rights, and default rights should all be clearly defined.

Not only can precise, explicit terms reduce confusion in the case of a disagreement, but the negotiating process can also reveal if there is a deal to document at all. Oral contracts sometimes leave unresolved concerns, leading parties to begin performing under an “agreement” only to discover large areas of dispute between them. These concerns would have been uncovered earlier in the negotiation process if it had been done over a written contract.


The ability to agree to secrecy and non-disclosure restrictions protecting sensitive information is one of the greatest advantages of having written contracts in business deals. The concerned parties are legally required to keep the transactions and information discussed between them secret as part of the agreement, and any party who violates this confidentiality clause will be held accountable under the agreement.

Contracts in Writing vs. Oral Contracts

When you pick a written contract over a verbal agreement, it makes it easier to vet the other side. Legal counsel must analyze written contracts to verify that they are solid. If the other party refuses to take this step, it may raise serious concerns about their business. They might be concealing something or be in legal problems that they don’t want you to know about. For instance, they may prefer a verbal contract since it places no restrictions on them. Because this isn’t a legally enforceable agreement, they can form the same verbal deal with another firm. They are, however, formally banned from entering arrangements with other parties if they have a written contract.

Not every partner will be as unscrupulous as the one mentioned above. Oral contracts, on the other hand, frequently lead to honest mistakes on the part of one or both parties because the contents of the agreement are not explicitly written down.

Contact a Business Lawyer to draft a Written Contract

Don’t get a written contract template from the internet and then have an attorney change it to fit your company’s needs. Most of the contracts you’ll find online aren’t legal, and the expense of rewriting them is typically more expensive than drafting one from start. Given the advantages of having one, call our business lawyer immediately to get a written contract tailored to your company’s needs.