Commercial Law – the importance of a written contract or agreement

Commercial Law Solicitors will always advise their clients about the importance of a written contract or agreement in place of any verbal agreement in relation to a business’ arrangements.

A cynical client might think this is just so that clients give us work to do. Optimistic clients might think that a simple ‘gentleman’s handshake’ still holds weight in 2021.

Jordans Solicitors’ Susan Lewis discusses what a company is advised to have in place in a bit more detail, in this latest blog post from our Commercial department. 

What is a contract or an agreement?

In legal terms, a legally binding contract or agreement can be reached orally or set out in writing. To amount to a binding contract, it must satisfy some basic requirements such as being clear about the terms so there is certainty about what has been agreed and there must be ‘consideration’ for the agreement. Consideration is money or money’s worth to support the contract and this is usually apparent in most commercial arrangements such as ‘I will sell to you X if you pay to me Y’. There is an exchange of goods/services for payment.

If then, a contract or agreement can be legally binding if it is reached orally, why do you need to worry about having a written document?

Why have a written contract?

The overwhelming benefit of having a written contract is to make sure there can be no misunderstanding about what both parties to the contract have agreed to do. A verbal agreement may be sufficient for the simplest of agreement involving modest sums of money, but a verbal agreement is vulnerable to a later argument about what the other party had actually agreed to undertake for you.

Having a written contract therefore sets out in clear wording each parties obligation to the other and includes other important clauses such as what will happen if there is a delay or a breach of an obligation. The contract will have consequences written into it for any default by one party and this can be helpful to ensure each party acts with good faith towards each other. 

Can a contract be written in an email?

The terms of a contract or agreement can be set out in exchanges of emails and again, if the formalities required for a contract are reached, the email exchanges can be sufficient to form a contract.

We would however recommend to clients to have important contracts properly drafted by an experienced solicitor to make sure your legal rights are protected properly. Jordans Solicitors are experts at drafting the following types of usual commercial contracts:

• Standard terms and conditions of business
• General commercial contracts
• Outsourcing/sub-contractor Agreements
• Supply Chain Agreements (Agency and Distribution Agreements)
• Partnership Agreements
• Shareholders’ Agreements
• Franchise Agreements 

Common benefits of having a written contract or agreement

The following are some of the common benefits of having your document drafted properly by a professional:

• The contract or agreement will be legally binding whereas there is a risk it will not be if it hasn’t been put together by someone with an understanding of the legal requirements for a contract;
• The contract or agreement will contain all of the terms you have agreed and will make sure nothing important is left out;
• The professional will advise you about other terms to include in the document to protect your legal position which you may not even consider including in your agreement;
• The professional will make sure your contract or agreement has ‘teeth’ by including in it important ramifications and consequences if there is a default by one of the parties. This can assist to focus both parties minds upon the importance of stick to matters such as key delivery dates or pricings; and
• Having a written document to present to your customer or supplier will make your business look efficient and professional. Some industries expect contracts and agreement to be in writing. 

Jordans Solicitors – Expert Company & Commercial Solicitors

If you need Company & Commercial Legal Advice in relation to this topic, or anything else in relation to your business, then get in touch with the Commercial team here at Jordans Solicitors.

Just call 033 0300 1103 or fill-in a Request A Call Back form by clicking the link below.