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I have often told people that there are 2 reasons entering into a written contract is a good idea.  The first reason is obvious.  In the case of a conflict during the course of performing the contract, the contract will help resolve the conflict, whether in litigation or other means of conflict resolution.  If there is no written agreement, either party can draw upon what it thought was the agreement, even if this seems totally absurd to the other party.

The second reason is a little less obvious, but is probably more important.  A written contract helps flesh out the responsibilities and obligations of the parties at the outset.  As an example, imagine a company is hiring a new sales associate that is to be an independent contractor. The company and sales associate have agreed that the sales associate is to be paid a 5% commission, and there is no dispute on that.  The relationship is rather simple.  The sales associate will sell the product of the company in return for the commission.  Is a written agreement necessary in this context?  In my opinion, the answer is a definitive “Yes!”

The written agreement will help in determining and communicating to the parties how the relationship will be governed.  The agreement will cover such items as whether there will be a protected area where the sales associate can operate without competition from another company sales associate, when the commission is paid, whether the associate will get commissions for selling products to existing customers of the company, whether the sales associate can enter into sales agreements on behalf of the company, etc.  And, putting these items down in a written agreement helps each party understand where it stands.  This makes the relationship more efficient and successful going forward as the sales associate does not need to ask these questions as they arise.  Further, it is best to resolve these issues at the beginning of the relationship before one party has gone down the wrong path and before the parties are in conflict.  When something is written down, not only does it make an official record that cannot be forgotten, but it also makes certain that all agreements are concrete ideas.  Many times, in our heads, abstract concepts will seem concrete until they are written down.

In the example above, it is obvious that the second reason behind entering into the written agreement is way more important than the first.  Is there likely to be litigation arising from the agreement?  No, almost certainly not.  Even if a disagreement arose, the amount in dispute would not be enough to warrant litigation.    There is no doubt, however, that the fact that both parties know exactly what their relationship is, and what their responsibilities and obligations are going forward, will help make the relationship more successful.

Disclaimer:  Gentry Law Group, LLC made this blog available to give us an outlet to describe our thoughts and analysis that we think might be useful to the public.  By no means is it meant to be, nor should it be used as, legal advice. This blog does not establish any attorney client relationship between you and Gentry Law Group, LLC. This blog is not a substitute for legal advice from a licensed attorney.  But, we do hope you found it interesting and helpful!