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A Contract Is Good Business

Business

You’re an independent service provider, or business owner. You and your customer have verbally agreed on a price and delivery time. Doesn’t that hold up? Isn’t that enough? Why is the addition of a written contract good business?

Why You Need a Contract

Of course your verbal agreement ‘holds up’. A contract can be both oral and written with each constituting a contractual obligation. But oral communication can be subject to interpretation. You meant one thing but somehow the other side understood something else. Also, oral communication doesn’t usually fully regulate and detail the relationship between the business owner and the client, only partially.

Even though an oral contract is legal, it’s definitely not solid. And this is for many reasons. As long as things are conducted according to what is agreed upon orally, everyone is satisfied. But what happens when some disagreement arises? That is when the problems begin, and without a contract, solving these problems can cost a lot of money.

What Can Happen Without a Contract

Let’s take the example of a design service provider who has agreed to design a kitchen for his customer for a certain price. The designer did his job and sent the customer a sketch. The customer was not satisfied and thus began the “back and forth” between them. During each communication the customer “remembered” something else that he was interested in. The designer felt that in light of the many changes the customer asked for, the payment he collected did not reflect the amount of work he had put in. There is clearly a problem here. If the sides had a written contract, they would specify how many changes the customer could make in the agreed exchange, and any change beyond that would be at an additional cost.

Many business owners think that customers will get “scared away” if they have to sign a contract. They also worry that if they are friends with the other party then a contract is unnecessary because, “I know him.” They also mistakenly think that if it is a small transaction, a contract isn’t needed.There are many other diverse reasons as well. But when something goes wrong the absence of a written contract further complicates the state of affairs between the parties. It makes it difficult for each side to accept what it should have received if there was a written contract.

A written contract is recommended and in today’s reality it can be said that it is even an indispensable obligation. This goes for all types of service providers and business owners, from small to large.

The Benefits of Drafting a Contract

  • Peace of mind and security are very important. The contract specifies your obligations and your rights as well as making the other parties clear. You know what you need to do, what to expect and what you get in return. So does the other side. This prevents uncertainty as well as false interpretation and disagreements.
  • A contract helps the business owner or the service provider collect a payment. The contract makes it clear to customers when the payment date is due, how to pay and when they are expected to receive an invoice for the transaction. If a customer avoids payment, the contract helps smooth the debt collection.
  • A contract is proof. Proof of what has been agreed on between the parties. It’s evidence of proof of the details of the transaction. In the event of a violation you can take legal measures to comply with those agreements.
  • A contract provides details for action. It outlines the actions that a party can take in the event of a violation, and can save you expensive litigation proceedings.
  • The contract sets out how it can be terminated or canceled. This is a very important issue. Many people have found themselves in a  long-term deal that they wish to discontinue.

Additional Advantages

  • You are perceived as a serious business when you have a written contract.
  • Your customers will be able to find answers to their questions in the contract provision.
  • A contract can regulate matters related to confidentiality, prohibition of competition and protection of the business’s intellectual property.
  • A contract improves the business and protects it.

Do It the ‘Write’ Way

In order for the contract to provide the proper protection, all the details have to be included. It should accurately reflect the service or products the business offers its customers, the nature of the transaction and the protection that stands behind it.

A good contract that encompasses the commercial and legal issues makes you look professional.

If you need a contract or contract forms for your business, you can call me, Aviram Goldstein,

at 054-738-7223

or send me an email  aviram@law-ag.co.il

Make sure to tell me you saw my article here at Hait Family Law.

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