Q. As a business owner I have a number of contracts in place with suppliers, although not all are in writing. Is this a problem?
A. By Stephen Crossley, litigation and dispute management solicitor at Napthens in Blackburn.
Getting the right type of commercial contract in place is critical to any transaction. A properly drafted contract sets out your obligations to the other party and governs the process that should be followed if things don’t go according to plan.
Many businesses fail to recognise the importance of commercial contracts and this can lead to costly and lengthy litigation if the relationship between parties breaks down.
A legally binding contract does not need to be in writing. A contract may be made orally or in writing or by a mixture of the two. Where a contract is made orally or partly orally and partly in writing it can be very difficult to determine exactly what was agreed between the parties if a dispute arises, because oral evidence can always be contradicted by other oral evidence. As the burden of proof in civil cases is simply on the balance of probabilities, uncertainty will always surround a case that is based on oral evidence.
It is therefore desirable to record in writing what has been agreed orally to avoid such uncertainty. This could be as simple as sending an email to the other party confirming what was agreed during the course of a telephone call.
Whilst it would always be preferable to have a written contract in place this may not always be commercially convenient, particularly if things need to be done quickly. However, care must always be taken to ensure that what is agreed is recorded and the parties understand their obligations to one another and a record is kept of this.
Following these simple steps will strengthen your position if things should go wrong and will save you time and expense in the long run