A contract is an oral or written agreement between two or more persons or entities that is enforceable by law. An exchange is made and promised. For example:
Seller: "I will fix your car for $500"
Buyer: "I will pay you $400 to fix it."
Seller: "OK, I will fix your car for $400, deal."
Enforceable contract formed.
A signed written agreement allows you to override all previous conversations. Getting out of or collecting on an oral agreement
could be difficult. Avoid "he said, she said" disagreements.
A contract may be oral or written. As long as it meets the legal requirements for contract formation, it is legally enforceable. And yes, a napkin agreement could count as a contract, so could email exchanges, verbal conversations and texts.
It costs a lot less money to resolve a disagreement on our own than going to court. Court appearances and hiring a litigation attorney are costly and take up a lot of valuable time otherwise spent on making profits for your business. Looks like he forgot that they agreed to $400 to fix her car instead of his original offer of $500. A signed written agreement would prove that they agreed to $400. The cost of having a written agreement drafted is easily 10-20% of what you might otherwise pay in the first month of litigation!
He said: "I fixed your car, you owe me $500."
She said: "No, I owe you $400."
It is important to set the price, scope of services, deliverables, and payment terms (among many other things), depending on the business arrangement. Here are a few common terms that address concerns many business owners have when establishing business relationships with others:
This is how invoicing and payment works between us.
This is how I would like you to handle my confidential information.
This is how we protect the business I already established with my customers.
This is how we will handle it if one of us defaults.
You could be liable to third parties for someone else's negligence or bad acts.
Your liability exposure could exceed what you earned under the agreement.
You could be forced to litigate in another state or country.
Your company could end up responsible for undesirable agreements made on its behalf without authority.
Independent contractors may be able to sue you as an employee for additional compensation.
Your IP and confidential information could be stolen.
Unless written down, all facts are open to interpretation making litigation difficult and time-consuming.
Protect your interests with templates. Here are some examples:
Independent Contractor Agreement
Confidentiality or Non-Disclosure Agreement
Master Professional/Services Agreement
Software License Agreement
As your business grows, consider establishing the fundamentals of a contracts management function to keep up with your business strategy. As you grow, it becomes even more important not to lose track of your agreements and to establish a way to systematically negotiate and enter into new agreements. Contracts management is all about efficiency in managing risk and reward so you can make informed business decisions.
Your contracts strategy should line up to your business strategy. For example, are you planning to target new customers for a new business line? You will need to make sure your contract terms meet your new business model and new requirements. Have you decided to resell your product through distributors? Have you decided to engage a service provider? Make sure you have appropriate terms in place so that you can collect your money and minimize your risks and potential liability.
The first step to increasing your value and gaining efficiency is to organize and track all your contracts and related documents. It is particularly easy to lose track of expiration dates. It is also common to forget to follow up on signatures.
Once you have some standardization and life-cycle management in place, you can ensure you are getting the agreed to benefits out of your agreements as well as avoid costly penalties. You will also be able to be pro-active about issues and prevent disagreements from escalating to damaging litigation.
Investors | The closer agreements are managed the more valuable your business is.
Insurance Providers | Your insurance premiums are impacted by liability exposures.
Customers | Effectively flowing down their requirements to your supplier's matters.
Employees | Employees are engaged and happy when empowered with clear parameters.
Intuitive Edge is a legal services and business consulting firm offering full cradle to grave contracts and business transactional legal services. We service agreements from inception to termination and everything in between.
Our Contracts Consulting Practice offers business solutions and hands-on teams to assess and address any gaps in the contracts management function.
Our Contracts Administration Practice offers you the ability to outsource the electronic storage, tracking and maintenance of your agreements and related documents.
Our Small Business Program offers annual packages that include consulting, templates and administration services at a discount.
Our team consists of experienced consultant attorneys, contracts management experts, paralegals and administration specialists. We are here to help you establish, maintain and improve your contracts management function as you grow your business.
Fine out more at www.in2edge.com