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6 Reasons You Need a Contract Before Entering into Business

July 23, 2018

The bulk of legal disputes in business litigation often revolve around issues of breach of contract. While you might assume that this means fighting over details of a previously established written agreement, that often is not the case and many of these disputes did not have a contract whatsoever or they have found that their contract was not actually enforceable. There are many pitfalls in the world of business but putting a strong written contract in place can help alleviate many headaches. Here are six reasons that you need a contract before entering into business.

Clarify Rights and Obligations

A contract can serve as legal proof about the details, rights, and obligations of both parties entering into business with one another. These details can encompass deadlines for deliverables, payment dates, clarification about services provided by a third-party, an agreement between the owner and business investors, or much more.

Both parties know what is to be expected not only of their own obligations but also those of the other party.

Fix Resource Costs

Many businesses may enter into contracts about renting space or purchasing resources from another business, and a contract can ensure that costs are fixed at a specific price for a predetermined amount of time. These fixed prices in contracts can mean the difference between economic viability or potential ruin due to unforeseen cost increases.

Hammer Out Details

While oral agreements can be enforceable in court, especially with big picture items like price, time frames, terms of employment, etc., there are many details that are covered in a written contract that many business owners fail to think about. For instance, if one party fails to deliver, how will those disputes be resolved? Who will bear the expenses? Will the other party pay the winner’s associated fees and costs? Geographically, where will the legal dispute occur? All of these important items can be specified in a written contract and provide clarity to both parties, should problems arise.

Commands More Respect

Both parties are more likely to follow through with the agreed upon terms when the contract is in writing. While some people may never falter when they give you their word, we are all more prone to treat a written contract with the utmost respect and seriousness in terms of following through with our end of the deal.

Avoid Expensive Disputes

Oral agreements can turn into a he said, she said type of dispute, which can often turn time consuming and costly. The name of the game in business is avoiding these types of costly distractions, which not only cause you to lose time and money in legal proceedings, but usually also lead to decreased productivity and earnings for the business as you get distracted from the true work you should be doing.

Expert Business Insight

It’s no secret that most small businesses can’t afford a dedicated legal team, and many big businesses know this. Unfortunately, larger businesses may try to take advantage of smaller businesses with unfavorable terms or conditions in their contract. Hiring a business lawyer prior to signing a contract can help an entrepreneur understand the true benefits or potential pitfalls of an agreement.

Hire a Business Lawyer

If you need legal help for your next business contract, the team at Fears Nachawati is here to help. Our attorneys are well-versed in all aspects of business law, from intellectual property to contracts, and serve businesses of all sizes, from the solopreneur to Fortune 500 companies. Don’t let your business get caught up in costly legal disputes by failing to have a contract in place or by using a contract full of holes and which is ultimately unenforceable.

If you need help tackling the complex world of business law, then don’t hesitate to schedule a free case evaluation with a member of our team by calling (866) 705-7584 or by visiting the offices of Fears Nachawati located throughout the great state of Texas, including in Houston, Dallas, Austin, Fort Worth, and San Antonio.


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