Why Use Written Contracts?

When two parties have reached an agreement, and have exchanged something of value, they have a contract. Often, to ensure that everyone understands their obligations, the terms of the agreement are memorialized in a written contract. Contracts can capture the details of all types of business transactions and should spell out the entire arrangement between the parties. When drafting a written contract, some common elements should be addressed:

1. Parties – A written contract should clearly identify the parties to the agreement, including any person or entity who may be responsible for undertaking action ancillary to the contract.

2. Scope of Work – A written contract should describe the services or work that will be provided or performed. This section may cover the duration of the contract, the methods or materials to be used, or the amount of direction to be provided to the parties.

3. Payment or Consideration – A written contract should identify the payment to be provided in exchange for the work being performed.

4. Warranties and Representations – A written contract provides an opportunity for any of the parties to describe additional warranties or guarantees of its product or services, or to make or disclaim any representations.

5. Default, Termination, and Remedies – When using a written contract, the parties can identify specific actions or times that a party will be deemed in default of the contract, when the contract may otherwise be terminated, and each party’s remedies for these situations. These remedies can include the payment of liquidated or actual damages, consequential damages, and costs of collection including attorneys’ fees, filing fees, and other expenses.

Written contracts should aim to use clear language and to define terms that may be vague or subject to dispute. Sometimes, statutes or regulations that apply to an industry may require additional terms in a written contract. While written contracts can seem intimidating, their ability to define the terms of an agreement can provide all parties with more certainty.