In modern society, contracts are a fundamental aspect of private and business relationships, shaping the way we conduct business and interact with one another.
A contract is simply an agreement between two or more parties that contains the terms and conditions of the agreed transaction or contractual relationship. For example, a contract could be for a simple straightforward agreement to purchase goods or services, where a buyer agrees to pay a sum of money in exchange for the seller’s goods and/or services. On the other hand, it could involve detailed and complex legal obligations spanning months / years, such as in a joint venture, or a transfer of shares in a company. Regardless, a contract provides the framework for businesses and individuals to conduct their daily lives and operations.
A formal written contract is not always necessary – a simple contractual transaction when buying tools at a hardware store or food from a restaurant are obvious examples.
However, in more complex matters, when there is no formal written document and the contract is purely oral/verbal, it would be much harder to identify the exact terms of the agreement, especially when it is disputed later on.
It is thus more prudent and advisable to have a formal written contract drafted for more complex situations and agreements, especially those spanning a long period of time where parties may not remember exactly what was agreed as time progresses. Some examples include:
A formal written contract benefits the parties as it makes clear the legal obligations of each side, and it also helps to prevent disputes by providing the clear terms of the agreement and how disputes should be resolved (should there be a disagreement).
While it may not always be practical to have a written contract for every situation, it would be prudent to at least outline the terms and conditions in writing. This is because without a formal written contract, it opens up parties to dispute as to what had been agreed – when one party tries to enforce the terms of the agreement, then he/she would find it hard to prove that there was an agreement to enforce in the first place. Even if an agreement could be shown, the exact terms of the agreement would also need to be proven. Thus, when actually trying to enforce an agreement without a written contract, there are many practical difficulties one might face when disagreements arise. If in doubt, it would safer to obtain legal advise as to whether you would need a written contract and if so, to have that written contract carefully drafted minimize the disputes later on.
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