When and Why You Should Get it in Writing

As a business owner, you'll want to make a habit of using contracts.

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by Chris Hinson

Not every contract has to be in writing to be valid and enforceable, but some contracts should be. How do you know when you need a written contract and what to put in it? The following tips can help you.

Some kinds of contracts have to be in writing in order for a court to enforce them. Contracts that will not be completely completed within 1 year should be in writing. If you enter in to a long-term contract with a distributor, for example, it should be in writing if it will not be complete within a year. A contract to buy or sell real estate should always be in writing. Don't rely on a mere promise from the landlord that you'll be able to buy the building that you've been leasing. A contract where one person promises to secure the debt of another person must be in writing in order to be enforced in court. Also, contracts to buy or sell merchandise over a minimum dollar amount need to be in writing. Check with an attorney who practices business law to find out what that minimum amount is in your state.

Regardless of whether a contract does or doesn't have to be in writing to be enforced by a court, having a written contract can really help you stay out of court altogether. Putting the terms of the agreement down in writing will help prevent the parties from forgetting exactly what was agreed to. Were those sales brochures supposed to be delivered to your office by noon on Tuesday as a term of your contract with the printer? Or was it just a ballpark estimate of when they might be finished? If the brochures are not ready, you and the printer may have very different recollections of your verbal agreement. What if the manufacturer who makes your products finds another buyer who will buy all he can produce and pay him more? Does he have to give you notice before cutting off your supply? Do you have the opportunity to match the price? Did you have a commitment for a year's supply? If having a ready supply of the product is vital to your business, you will want that contract in writing.

You should get the help of a lawyer in drafting and negotiating any contracts that are significant to your business. If possible, find a lawyer with experience negotiating contracts for your type of business, i.e. manufacturing, construction, retail, Internet.

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