Keeping It Real: Why Written Contracts are Fundamental to a Functioning Business

Commercial Partner Ian Thomson continues his “Keeping It Real” blog series with an update on why written contracts are fundamental to a functioning business.

Delivering my 10-minute education slot recently at my favourite networking group, I was pleased to find that my fellow members (not lawyers, I hasted to add) all seemed to be aware that, in the main, a contract need not be in writing for it to be binding.

Pleased because this was the perfect cue for me to expound on the importance, nevertheless, to businesses of ensuring that all their commercial contracts are fully and accurately reduced to writing.

This might seem a trite and obvious point to make in front of an audience of experienced and reasonably sophisticated business owners and managers, but it is a point that still needs making as it is overlooked far more frequently than is sensible.

It’s easy to regard the contract as some kind of ritualistic obstacle that needs to be negotiated (or circumvented) before the parties may begin buying, selling, delivering or making stuff, or whatever else it is that they are supposed to be doing. Rather, a written contract, often supplemented by rules originating from legislation or the common law, should represent the definitive record of the deal that you have agreed with your trading partner. If carefully and conscientiously written, they can provide, or at least assist in providing, the answers to the most common legal or operational issues facing the business.

My mantra (which many of my clients will be sick of hearing me say) is clear and simple: make sure that everything the other party has promised you or agreed, and on which you might foreseeably need to rely, is correctly reflected in the written agreement. This too might seem trite and obvious, but there are legions of businessfolk who wish that they had been told that or, having been told it, had resisted the temptation not to follow it.

Make no mistake: there are people around who prey on those who consider written contracts an unnecessary use of time, effort or money spent on lawyers’ fees. Many of us will have encountered the type who profess to make some kind of virtue out of eschewing proper written contracts and seek instead to conclude deals on the strength of a handshake or a few scribblings on the back of the proverbial cigarette packet as some high-minded mark of their own integrity. They do this, for the most part, for one principal reason, namely to give themselves the opportunity to indulge in a spot of selective interpretation of what might or might not have been agreed should circumstances arise which might suit them to do so, and without a clear record of what has been agreed you basically have next to no chance of successfully defeating that kind of chicanery. Don’t be tempted.

The last word on this must go to my old University tutor, whom I well remember, on my very first day as a law undergraduate many years ago, explaining to a group of attentive freshers that, if nothing ever went wrong in life, there would be no need for any lawyers and that we would in due course be conditioned to believe, as he put it, that every marriage would end in divorce, every motorist would crash his car every time he went out in it, every contract would be discharged by breach and every ship would sink every time it took to the high seas. This was not an expression founded on paranoia, or even over-caution, but an invaluable statement of the need to prepare for what might go wrong or, in, other words, to practice sensible, effective risk management. And that’s exactly what you are practising when you use clear and appropriately-comprehensive and detailed commercial contract documentation.

For an informed discussion regarding your business's commercial contract requirements, please contact Ian Thomson:  |  07511 732644