It may be that you’ve never particularly thought about your business contracts before… or, if you have, that you’ve never really wanted to. However, it is essential to debunk some of the myths floating around about contracts in order to ensure they can be used correctly – some of which you may have even fallen for yourself!
The most popular are as follows:
- Contracts have to be in writing.
This is entirely untrue. Verbal and otherwise implied contracts can and do exist, providing they meet the criteria to do so.
However, this does not mean that they are not incredibly risky. It is hard to prove what has and hasn’t been agreed between parties where there is no evidence to underpin this. On the other hand, written contracts can be relied upon and serve as clear evidence should issues ever arise in the future.
- It’s been signed, so it must be legally binding.
Contracts can be challenged and ruled invalid regardless of whether they have been signed or not. As mentioned above, they have to meet certain conditions to be considered legally binding. It isn’t even a requirement for a contract to be signed at all, though it certainly doesn’t hurt!
- That wasn’t stated in the contract, so it must be irrelevant.
If you think that whatever is stated in your contract goes, you might want to think again. Contracts are governed by a range of laws and regulations, and failure to specify these in a contract does not stop them from applying.
For example, you cannot limit your liability as much as you’d like under a contract. By law, it is impossible to cap, in any way, liability for personal injury and death. Even if it was stated in the contract terms that this was capped – say, to the contract price – the law would still take precedence.
- Trust is the best contract there is.
If only it was so simple. The fact is, no matter how long you’ve worked with somebody, disputes can always arise.
This doesn’t mean you have to set harsh terms from the get-go, of course – contracts are usually enforced in the worst-case scenario, such as where payment isn’t made, or where intellectual property is misused.
We meet so many businesses who believe that having contracts in place will put a damper on their business relationships. So many of these same businesses later run into issues that could have been easily resolved if they had had a contract in place from the start.
The reality is that having a contract in place can actually strengthen business relationships in the long run by ensuring that they last as long as possible.
- It’s easy to draft a contract.
You may be thinking that it’s better to have something in writing than nothing at all. That contracts are just a written explanation for the more important thing – your conduct – so they don’t need to be anything too fancy.
This type of thinking often leads to businesses attempting to draft contracts themselves, or using templates they’ve found from the internet. AI is certainly a tool that is used for this, too, particularly in more recent years.
However:
- Whilst it is true that you know your business better than anybody else, it is likely that the same cannot be said for contract law. Those more experienced in drafting contracts understand, in depth, the regulations that underpin them, and their work with other businesses means that they are also aware of different issues that can arise. This means that they can identify risks you are likely to encounter – some of which you would never expect – and then help to draft your contracts in such a way that these can be protected against.
- Templates are generic, bog-standard documents, created with a one size fits all approach. However, contracts should never take this approach. Your business and circumstances are unique, so the contracts you use should reflect this.
- AI is an ever-developing tool which can be useful in many respects. Nevertheless, the accuracy of what it generates is not guaranteed in any respect. It does not have a human outlook, nor a legally qualified one, and almost certainly utilizes templates in line with the above in order to create your contracts. How can you be sure that they comply with the law? That they won’t be considered invalid in the future? The answer is that you can’t.
The truth is that contracts are an investment, and should be treated as such. Their purpose is to protect your business against loss and excess liability in the future. Failure to ensure that they are relevant, legally binding, and enforceable leaves you open to unnecessary risk, whether now or in the future.
Still not sure?
Feel free to get in touch with us today at 01604 217365 or info@bebconsultancy.co.uk in order to discuss what contracts might be suitable for your business.