The Written Contract

Close your eyes and visualize a written contract. Did you picture a multiple-page, lengthy document? Was it covered in tiny writing that said things like "including but not limited to"? Did you picture yourself anxiously flipping to the last page to sign? Yeah, you're not alone. Deep down inside most people know it's important to use a written contract but get overwhelmed when it's time to create or sign one. If you read this post, you know that a written contract isn't required, so why would you want one? Here's why.

As a review, there are certain circumstances when a written document IS required. Keep in mind that these requirements vary from state to state so be sure to check the specific rules in your jurisdiction. That being said, the following types of contracts are usually required to be in writing to be enforceable:

• Contracts that cannot be performed within one year
• Contracts where one person agrees to guarantee the payment of another's debt
• Contracts that involve the transfer of interest in real property
• Prenuptial contracts
• Contracts for the sale of goods for $500 or more (this one is governed by statute under the Uniform Commercial Code)

So now you have an idea of what contracts are typically required to be in writing. If you don't fall within these categories, it's still a good idea to use a written contract, even if it's a simple one. Why?

Details. Details. Details.
In your mind, you might imagine most contract disputes arise thanks to some sort of willful deception or shady dealings but actually it comes down to human nature. Details can get lost or misunderstood, especially in lengthy or complex negotiations. In addition, our memories are not foolproof. Putting an agreements in writing helps prevent later misunderstandings and forces the participants to actually articulate their intentions and expectations.

Clarification of Intentions
In addition, the actual process of writing it out helps reveal unclear points that might need further negotiation or clarification. You don't want to commit to an agreement where you're not exactly sure what the other parties goals or intentions are. The clearer you can get up front, the better off everyone will be in the long run. Highlight these wishy-washy points by writing it out and then get clear before signing.

Signatures Make it Real
The signatures executing the contract help solidify that there is an actual enforceable contract in the minds of the parties. The act of signing reinforces that both parties are now obligated by contract to certain duties and responsibilities.

Professionalism and Trust
Let's face it, in business dealings the impression you make on the other party means a lot. Who would you trust more? The party who throws some vague terms at you and expects you to perform? Or the one who presents you with a well thought out written contract. It can help enhance the perceived value of your business. In fact, researchers have found that firms were more likely to express satisfaction with the other party's performance when the parties negotiated a detailed contract along with establishing a trusting relationship.

As a final note, remember that a written contract doesn't need to be a complex document full of legalese. A simple outline of the key points can usually suffice. In some cases even an email might be all that is needed. Happy negotiating, friends!