Do you close deals for your business with a firm handshake? If you take clients or suppliers on their word and never sign a written contract, you are putting your business at risk.
We cannot stress enough how important written, signed, well-drafts contracts are for business deals. Written contracts list the exact terms of an agreement so that the parties will have a lot of difficulty claiming that they misunderstood later on. No matter how much you trust the other party to a deal, he could change his mind later and try to back out by claiming you agreed on something different. A good business contract explains the consequences if either party does not fulfill their part of the deal.
Written contracts include additional information that likely was not discussed verbally between the parties. For example, good written contracts explain payment details, timelines for delivery and supply, what happens if it is impossible to make a deadline, and dispute resolution procedures such as mediation or arbitration. Most contracts list the applicable laws (such as Utah or Wyoming state law) and the venue for any lawsuit or arbitration. These provisions cut down on a lot of additional arguing while the parties perform or if they fail to perform the contract’s terms.
An extremely important part of many written business contracts that the parties almost never discuss verbally is a confidentiality and non-disclosure provision. This part of a contract states that the parties will not disclose certain sensitive information, such as the transactions made pursuant to the contract or information passed between the businesses in the course of performing the contract. Many businesses use these provisions to protect trade secrets and private strategy information such as customer lists. If the other party to the contract shares the information, it has violated the contract.
Finally, in case of a dispute that the parties cannot resolve on their own, a written contract is much easier to take to court than a verbal one. One of the parties can file a lawsuit for breach of contract and attach the written contract to the suit. With a verbal contract, the parties must argue over who said what, which terms were agreed upon and which were not, and when the deal was truly closed. It is much more problematic to enforce a verbal contract in court, for practical reasons alone.