As a lawyer, I know that some individuals incorrectly view written contracts as a cost of doing business. This is shortsighted. Committing an agreement to paper is probably the single most profitable action that a business can make. A written contract is not incidental to business – it is the business.
A written contract commits parties to perform certain actions, but it more importantly limits what is required by each party and determines which parties bear which risks. Outlining each party’s obligations can result in earlier payment and less wasted resources. Detailing exclusions and risks makes the parties more profitable by avoiding or limiting costly disputes and litigation. Parties to a written contract are also more likely to be satisfied at completion of the contract and commit to repeat business, which means more profit.
Consider a contractor hired to remodel a room in a house where a written contract is not used. One party may believe certain work is included in the price, and the other party may not. Who is responsible to move or cover the furniture? Who is responsible for certain types of damages and to what amount? Is there a warranty on materials or labour, how long is each and what do they include and exclude? Is there a deadline for completion?
These are simple questions with answers that can be easily written down. The act of writing the terms down will make a business more profitable and reduce disputes, not to mention the fact that it makes a business look more professional. A business will never be sorry it had a contract, it will only be sorry if it does not. The rule is simple, commit it to paper and make more money.