You sit down with a potential business partner and the two of you come to an agreement. You shake hands. You agree to work together.
That's when you suggest writing up a contract, but your new partner says you won't need one. The handshake is enough, they claim. They promise to uphold their end of the deal.
But will they? Is that handshake really enough? It may not be. Below are five reasons to get a real contract:
- Your new partner may not be as honorable as you hope. If things go south, do you want there to be any confusion about what you agreed to?
- People do not have the best memories. The deal seems clear today, but will either of you forget the details by this time next year?
- You may disagree on the specifics. If your partner thinks you are going to pay up front and you think you can pay in installments, for example, it can lead to serious conflicts.
- Misunderstandings are a significant risk. You may have the best intentions, but not writing things down means you don't get a chance to go over the specifics. You both may assume different things about the deal, which only come to light when you disagree later on.
- You need a written record if the contract gets broken. It's far easier to show what was owed or expected when it is in writing and cannot be disputed.
If you do wind up in a legal battle over a breached contract, no matter what type of contract it is, be sure you know what steps to take to protect your business.