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The Importance of Having Well-Written Contracts

May 27, 2014
  By Daniel H. Stoner, Esq.

Contracts are the life blood of most businesses. They define important relationships such as those with your customers, employees, landlords and contractors. Yet so many businesses go about their day to day operations relying on contracts which are poorly written, or even non-existent. One such reason is because business owners (rightly so) do not see it as worthwhile to pay exorbitant fees to an expensive attorney to draft their documents. Another reason may be that they simply are not aware of the extreme risks involved in neglecting the quality of their contracts.

The negative effects of a poorly written contract, or no contract at all, can be devastating to a business. The legal ramifications of certain transactions and services can extend for years or even decades after the transaction has taken place. A contract that is missing vital clauses could cause lawsuits and judgments that can unexpectedly arise years after you have forgotten all about the deal you made a long time ago. When these occur it can be an enormous headache, or even worse, it can sink your business.

You are also opening your business up to being taken advantage of by others. The law may protect certain vital rights in and of itself, however, many important protections available in contract law can only be gained from spelling it out in writing in the contract itself. For some kinds of contracts, the agreement must be in writing, and when you have no written contract to rely on, you may be allowing others to completely cancel a contract and leave you with nothing and no legal protection whatsoever. You may also find yourself responsible for damages which you yourself did not commit simply because you forgot an important key provision.

Because of these risks it is simply foolish to engage in business without written contracts. It is true that many contracts can be done effectively on an oral and handshake basis, however for most of the vital contracts that a business relies on it is downright reckless to not have them in writing. Another method which businesses use is to rely on web templates and mail order forms. While this is of course better than having nothing at all, many of the web templates available are inordinately generic and often are missing key aspects that fit your own situation. Many of these web templates are designed to generic, and may not even be valid in your state. Even if a web template is valid in your state, it may still be missing key provisions which can fully utilize the intricacies of the law and function as a contract that fully protects you in an optimum manner. A web template is better than nothing at all, however it is still overall an inadequate way to protect yourself and your business.

Why do businesses rely on such shoddy methods for their contracts despite all the risks? For one, they may not simply appreciate the risks or fully understand the ramifications of what they are doing. However the most common reason is that they simply cannot afford an expensive attorney to do it for them. This is perfectly understandable, many if not most law firms are far too expensive for your average small business. However, this does not mean that all lawyers are too expensive. There are many law firms which specialize in providing small businesses with affordable contract advising. One way to find out is to simply call around and ask how much a good contract of the kind you are looking for costs, if they tell you the average cost then you can compare prices, if they equivocate and cannot give you a good answer chances are they are going to be too expensive. You can also ask an attorney to simply review and revise a contract that you already have put together yourself, this can greatly save costs. Having a professional review your contracts is the only way to ensure that your contracts are up to snuff.

It is also important to remember that most small businesses do not need a unique contract for every transaction they engage in. Many businesses engage in transactions that are all substantially similar to one another and thus can have a few “standardized” contracts containing key terms which can be used repeatedly. A good attorney can draft you a standard contract that you can use repeatedly over time. As most small businesses will usually only need one or two standardized contracts to do business, this option is extremely affordable over the long run. Even if it costs you a few hundred dollars to have a contract standardized, if you plan to use it for dozens, hundreds or even thousands of transactions over the coming years it will be well worth the costs. And seeing as how thousands of transactions means thousands of potential lawsuits and judgments, going with cheap web templates doesn’t make sense, and going with nothing at all is downright suicidal.

Having good contracts goes in tandem with having a good business. Businesses which succeed are the ones which pay attention to the things which are most important. Businesses which fail often ignore the things which are most important. The contracts you enter into are one of the most important parts of a businesses’ operation. There is absolutely no excuse for ignoring them altogether or going with inadequate web templates. One of the keys to making sure that your business is successful is to have professionally drafted and reviewed well written, well thought out contracts that protect your business and your livelihood.


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