If you are starting up a business, you might be unsure about when — or if — you need to use contracts. You might even deal with others who insist you do not need to waste time drawing up one up, especially since you’re still a small operation. Some people may even ask if their word (or handshake) isn’t enough for you.
It isn’t, and it shouldn’t be. Here are some times every entrepreneur needs to use contracts:
Employing people
Contracts can be critical in managing relationships with your employees. They can help both sides understand where their obligations to each other start and end, reducing the chance of misunderstandings or disputes.
For example, a contract can set out how many hours the employee must work and what remuneration they will receive for it. It can also set out what steps the employer will take if they are unsatisfied with their performance.
Supplying or buying
When you buy something, be it a service or a product, you have the right to expect certain standards to be met. The same applies when you are the one selling the service or product. For example, you have the right to expect payment from a customer on time.
Without a clearly written contract, confusion can easily arise. For example, how do you define whether a payment is “on time” or not? Does it mean before the goods arrive, within a week of receiving them or what?
It may seem relatively easy to write a contract, but it is important to remember that clarity is crucial. A poorly worded contract or one that overlooks something could increase the chance of misunderstandings, and fail to provide the protection you hoped if things were to go to court. Legal guidance to draft your contracts is therefore wise.
