5 Reasons to Get That Next Contract in Writing

Although verbal contracts are just as enforceable as written ones, the benefits of putting your agreement in writing far outweigh the costs. The days of shaking hands and hoping for the best are behind us, and COVID may have helped put an end to this relic of the past. Written contracts are far more common today and have become pivotal in -- facilitating business transactions, creating mortgages, transferring ownership of property, and securing employment.

Written contracts exist so frequently today that sometimes people don't even realize they've entered into one, for example, signing away their rights to go on that dangerous ride at an amusement park or clicking yes to reading the terms and conditions of whatever website or software you're trying to use. While there are many benefits to having a written contract, below are five common reasons why you should make sure your next contract is in writing:

Reason #1 - Written Contracts are Easier to Prove in Court

This one speaks for itself. If you entered into an agreement with someone else and they've breached that contract, you can file a lawsuit and submit the written contract as evidence. The written contract is the best evidence to provide, not only as proof that the contract between the parties existed, but precisely what the exact terms were between them. In contrast, a verbal contract can only be proven by the testimony of the parties and any traceable actions taken, for example, email exchanges, order forms, deliveries, etc.

This places a heavier burden on the court to weigh the credibility of the parties and piece together what might have transpired between them. A written contract is clear, concise and to the point. In a well written agreement, there's little to no room for guessing. Either a party has breached a term in the contract or they haven't.

Reason #2 - Written Contracts Capture the Original Intent of the Parties

When a written contract is drafted, it memorializes the original intent and agreement between the parties. As time passes and memories fade, the parties can look to the written agreement to remind themselves of exactly what it was they originally signed up for. This certainly isn't available to those that enter into handshake agreements. The risk for breaches and disputes increases exponentially as time progresses under a verbal agreement.

Conversations over how things were originally discussed and what the parties officially and unofficially agreed to can get tangled and inevitably result in conflict. Of course, written contracts most often avoid these situations because all of the thinking has already been incorporated into the agreement and there's no need to rely on memory to remember the intent of the parties.

Reason #3 - Expectations Between the Parties are Managed

One of the most important features of a written contract is projecting out into the future and anticipating common and worst case scenarios that could arise throughout the transaction and what the parties can and cannot do in those situations. Written contracts cannot possibly flesh out every possible scenario, but often the most typical ones relative to the transaction will be captured.

Force majeure, risk of loss, liability, indemnification, default, remedies. These are all common clauses that help to manage the expectations of the parties. If lightning strikes and burns down the building, can I break my lease? If I default on my loan payment, can the bank accelerate my mortgage and force me to pay the loan in full? Questions like these can be incorporated into written contracts with precision. Verbal contracts cannot even come close when attempting to cover issues like these.

Reason #4 - If there is a Dispute, the Contract Will Spell out How The Parties Can Handle The Conflict

Most well written contracts will include a dispute resolution or remedies clause. This covers common disputes between the parties and what remedies are available. Depending on the complexity of the written agreement, its quite common to see arbitration or mediation clauses that force disputes away from a courtroom setting. Sometimes, a contract might allow the parties to resolve the conflict between themselves and set a strict timeline to reach a resolution. Additionally, if the parties cannot reach an agreement, the written contract will often push the parties towards arbitration or mediation.

In the alternative, some contracts will require that the parties handle their issues in a court of competent jurisdiction before a judge and jury. The benefit of a written contract is that the parties get to decide at the inception of the agreement how they want to handle disputes. Verbal contracts just don't provide for this. If you are involved in a dispute over a verbal contract, you can certainly bet that you're going straight to court, which could easily become a costly endeavor.

Reason #5 - Some Contracts Must Be in Writing In Order to Be Valid & Enforceable

According to the New York General Obligations Law, there is an enumerated list of contracts that absolutely must be in writing in order to be valid. So, attempting to enter into a verbal agreement for these types of contracts is not an option as a matter of law. Unfortunately, there's no way around this requirement. There's no better reason to put a contract in writing than because the law said so! Some of these contracts include the following:

Any contract that by its terms cannot be performed within one year from the date the contract is formed
A contract which includes a promise to answer for the debt of another person (e.g., a parent co-signing for their child’s student loans)
A contract made in consideration of marriage (e.g., pre-nuptial and post-nuptial agreements)
A contract involving a subsequent or new promise to pay a debt that was discharged in bankruptcy
A contract to pay compensation for services conducted to negotiate a loan, the purchase or lease of real estate or the purchase or sale of a business

If you haven't reached the conclusion by now, written contracts are far superior than verbal contracts and provide a secure, effective and efficient way of memorializing the intent and expectations of the parties. For the above reasons, you should certainly make sure that your next contract is in writing. If you have any questions about contracts or need a contract to be drafted or reviewed, be sure to contact a competent contract lawyer to best handle your needs.

Disclaimer: This blog post and similar posts are not to be considered as providing legal advice. The discussion here is meant for educational and informational purposes only and shall not create an attorney-client relationship with the readers of this content.