6 Reasons Why You Need to Use Written Contracts

By Dan Radak

In order for any kind of partnership to work, there needs to be an agreement between the parties involved. This agreement can be verbal or written and the latter are far more customary in the business world. While some may see such a thing as unnecessary and excessive, the truth is that when it comes to your assets and your future in the business world, you can’t afford to take any chances. Here are the top six reasons why you need to use written contracts.

1.          Rights and obligations

With verbal contracts, there is nothing to guarantee each party’s right and obligations. Regardless if you have a trusting relationship with other parties, sometimes it’s wise to write down what is expected of each party. This makes it simpler for everyone, due to the fact that people in question don’t have to engage in autonomous interpretation of their duties and responsibilities. This way, a misunderstanding can be avoided. Second, you need to determine a penalty for failing to honor this agreement, in order for this contract to make any sense. Lastly, you need to ensure that the other party doesn’t start changing the agreement on their own.

2.          Determining payment

Determining the payment system is one of the most important reasons for the existence of the contract in question, seeing as how both parties are likely in the deal for financial gain. Still, there’s much more to this than just determining how much is there to be paid. The amount is a major issue but it’s not the only thing that matters. Another thing you need to determine is – the payment date and the method of payment. With so many gateways, it’s incredibly important to clarify this from the very start.

3.          Vendor compliance policy

Vendor compliance is a legally binding contract that establishes your expectations and requirements when it comes to service standards, product conditions and delivery dates when it comes to your products. Other than this, it’s also a document that’s there to dictate penalties in a scenario where the above-listed terms aren’t met. In other words, if you’re running a business that depends on vendors, what you need to find are reliable vendor contracts templates to have at hand at all times.

4.          Guarantee of authenticity

Due to the fact that the volume of creative work out there (particularly when it comes to various forms of intellectual property) is constantly growing, it’s important that the contract specifies what happens if the work turns out to be plagiarized. Before this can take place, however, you also need to state what constitutes unoriginality. If the writer that you’ve hired decided to subcontract a job, would this be interpreted as using someone else’s work? These are all great issues that need to be resolved as soon as possible in order to avoid a potential misunderstanding.

5.          They are thorough and specific

The main reasons why written contracts even exist is that they’re often more thorough and specific than verbal agreements. Other than being more legally binding, these contracts are prepared for a longer period of time, they’re often reviewed by several parties before being signed and they’re read thoroughly by each party before signing them. The importance of being specific is such that if there’s any ambiguity in the contract itself, the court is most likely to determine in favor of a party that didn’t compose the contract in question.

6.          Determining jurisdiction

One of the biggest problems with remote work is the fact that the employer and the employee or different partners on the same deal don’t always belong to the same geographical area. In fact, it’s completely possible that different parties belong to different states, countries or continents. This means that local tax and business laws may greatly differ. This is not just a problem when it comes to the issue of repatriation of profits. Therefore, from the very start, it’s incredibly important that the contract determines which jurisdiction this will all fall under.


Finally, contracts always mention a scenario where the agreement wasn’t fulfilled and there’s a penalty involved. The fact that there’s a legal mechanism behind a contract means that both parties are far more likely to do their part. In other words, instead of it just being a legal mechanism, this also creates a stronger law-abiding psychological moment in both parties that have signed a contract, meaning that it provides a more reliable guarantee for everyone.

Dan Radak is a marketing professional with eleven years of experience. He is currently working with a number of companies in the field of digital marketing, closely collaborating with a couple of e-commerce companies. He is also a coauthor on several technology websites and regular contributor to Technivorz.

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