Oral Agreements Versus Written Ones: Why You Should Never Enter A Deal Without A Written Contract

When a deal breaks down, the written contract governs.  The contract is the keystone document that establishes the terms of the deal – the who, what, where, when, and how of your agreement.  If there is a dispute, your contract will be the most important document considered.  Incredibly, businesses sometimes forgo entering into written contracts, instead relying on handshakes to cement deals.  While informal deals may seem convenient, a well drafted written contract, by clarifying the terms of a deal, offers protections no business should be without.

Among other things, a properly drafted written contract sets forth what each party’s rights are, what each party’s duties and obligations are, and how disputes are to be resolved.  Written contracts thus inject a measure of certainty into deal making.  They also offer reassurance when deals go sour.

A nifty term a contract should have is an integration clause.  An integration clause makes clear that the contract – the written document – represents the entire deal.  This is important because it prevents a party from using information beyond the written words in the agreement – such as pre- or post-deal communications – to change the terms of the agreement.

For example, consider an integration clause in a contract that specifies that late delivery excuses the need for payment.  In the face of such a contract, arguments from your supplier like, “You promised my company could supply product late and still get paid,” hold little weight.  If the fact you supposedly said so wasn’t written in the contract, then pursuant to the integration clause, whatever you supposedly said is outside of your deal.  What matters is what was in writing.  These are the kinds of protections a written contract can offer and none of them exist if your deal is merely oral.

A properly drafted written contract should be a prerequisite to any significant deal.  Retain an attorney capable of drafting one.  Look for an experienced lawyer who can clearly lay out the terms of your deal and draft it to provide protections for your business.  A business should never find itself fighting a lawsuit over a broken oral agreement when a written contract could have clarified the parties’ obligations and avoided the need to go to court.