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Contracts, why do we need them??

May 30, 2018, By

Love them or hate them contracts are a vital tool for any business. In spite of this, a huge amount of the commercial disputes which we deal with on a daily basis start with a client coming to us with no written agreement to rely on.

In situations such as this we’re instantly on the back foot, we can’t point to particular clause which shows that the other side acted unlawfully and, because of this, our client’s opponents are quick to claim that they aren’t at fault. What follows is an effort to piece together a contract from conversations, text messages and emails. This can often result in missing, incomplete or downright contradictory terms, leaving the parties with no idea as to the true situation.

A contract, simply put, seeks to avoid disputes. Its aim is to set out a list of terms which are agreed between the parties thereby giving both sides something to rely on if the situation changes. Parties inevitably fall out less and work together more if they both know where they stand. Disputes are settled quickly (often without the need for legal advice) because both sides can easily refer to their contract and find out who’s at fault. A well drafted contract is black and white, binary and undisputable. Yes, they can often look scary and yes they are frequently too long, but these things can be addressed with careful drafting and they shouldn’t be a reason to trade without a written agreement.

Of course the biggest reason why parties choose not to enter into a contract is because they already have a close personal relationship with the other side. Maybe they’ve worked together for many years or they were friends before they went into business… this is all great but it’s certainly not a reason to avoid a written agreement. The problem in these situations occurs when relationships break down, people change jobs or companies are bought out. In all of these circumstances the personal relationship can no longer be relied upon to maintain the business and so something else (you guessed it, a contract) needs to be used in its place.

So, our advice to all clients, big and small, is always consider whether your commercial agreement can be particularised in a written contract, whether it’s an agreement with your client, supplier, data processor, freelancer, manufacturer, agent, licensee or assignor. Contracts can be used in many different ways and can frequently be re-used (e.g. standard terms and conditions for the supply of services). On that basis they’re often a long-term investment which, if all goes well, might never be needed. However, when that one in a hundred unfortunate deal comes to light, you can bet your bottom dollar that you’ll be reaching for the contract.

Briffa works on a fixed fee basis for the vast majority of its contractual work. Please call one of our friendly lawyers on 020 7288 6003 for more information.

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