07
Feb 2023

The importance of written contracts

Adam McKie in our Corporate and Commercial team sets out the importance of written contracts in business transactions.

Whilst it is understandable that for many companies doing business with other parties based on trust may be the norm, by conducting business in this way, companies are leaving themselves susceptible to issues that a signed and mutually agreed contract would eliminate.

By putting a contractual arrangement in place with customers and/or suppliers, a company could benefit from the following:

It provides both the supplier and the customer with proof and certainty in relation to their obligations, rights, duties and how long the contract will bind them.
If the business relationship deteriorates, a contract outlines the previously agreed upon steps required for how to move forward. If a written contract is not in place, then the parties may be left piecing together bits of correspondence or verbal communications and legally implied terms to determine the terms that govern the relationship. This approach lacks certainty and can result in costly and time-consuming disputes between parties.
It allows a company to operate on its terms rather than relying on complex statutes and guidelines to govern its working relationships.
If a company needs work performed by a specific deadline, a contract binds the party to that time frame. For example, if they require a party to deliver goods by a specific date, a clause in a contract can be added to ensure delivery on or by that date. In the event that delivery hasn’t taken place by the specified deadline, a contract will outline what remedies are available.
A binding contract can establish how and when payment will be due for goods provided or services rendered. Should a party refuse or fail to make payment, legal action can be brought to recover payment.

It is important when putting a contract in place to ensure that the obligations are watertight and that what has been agreed verbally reflects what is in writing. It is also important before entering into a contract that a company has not drafted, that they fully understand their obligations, rights and duties and that there are no onerous clauses which impose an unnecessary burden on them.

If you require any initial advice regarding drafting a contract, reviewing an existing contract or reviewing an agreement prior to your business entering into it, our expert team of lawyers offer various services that range from one off reviews to, LINK, our bespoke in-house retainer package that you can customise to cater for your specific commercial law needs which can include the following services: