While a written contract is not necessary for every action and decision taken by a businessperson, it can prove invaluable when:
- Disputes arise over delivery dates or option terms;
- Clear, precise written proof is required to resolve litigation;
- Complex details are anticipated and dealt with on paper instead of in the courtroom
There are times when it is in an executive's own best interests to have a written agreement on file. First, a boilerplate model of a basic agreement should be kept on file and used when a company hires a consultant or independent contractor. Second, a letter of agreement should be used when an executive wants to create a "written handshake" that states the essentials of the agreement without becoming mired in details. Such an agreement states the simple facts in writing and is confirmed and accepted when signed and returned to the sender.
This document should:
- Identify both parties and the role of each in the agreement;
- Describe the nature of the agreement;
- State payment terms, time expectations, and other contingencies of the agreement.
In the case of independent contractors, the document should include a clause prohibiting the disclosure to a competitor of any work created for this employer.
It isn't necessary to call an attorney before making every decision. Such hesitation could affect the spontaneity of business agreements. But it is wise to have boilerplate documents reviewed by counsel before they are used for the first time. When in doubt regarding a simple agreement, it is worth the peace of mind to consult an attorney. Counsel should be sought when complex situations are involved, such as incorporation, partnership, lease agreements real estate agreements, debt collection, litigation, and labor/management relations.
The Small Business Administration (SBA) has business development specialists who can provide useful information and direction in response to telephone queries. To find a nearby regional office, call the SBA Answer Desk at (800) 827-5722.