Doing business typically requires reaching an agreement with another party. Companies negotiate working arrangements with service providers, employees, vendors and consumers. They may have to compromise on the details regarding pricing, delivery dates and other key elements of the arrangement to reach a mutually-beneficial agreement.
In theory, verbal contracts are legally binding in Louisiana, just like written agreements. Some professionals running their own practices and business leaders make the mistake of regularly relying on verbal agreements instead of written contracts. They discuss issues and needs with other parties in person or on the phone. They then move forward with a working relationship based on those informal promises.
Unfortunately, many business leaders and professionals who rely on verbal agreements end up burned by that decision. Written contracts are typically preferable to verbal agreements for an assortment of different reasons.
Contracts validate specific terms
If two parties reach an agreement with one another, either party could make questionable assertions about the agreement later. Without a written contract affirming the timeline for the project, the client’s expectations regarding materials and other critical details, any dispute about the arrangements could devolve into a he-said, she-said scenario. Contracts help clarify what each party expects from the other and make it easier to enforce the agreement later. The parties can reference the contract to resolve disputes and can prove what terms they set to outside parties.
Contracts allow for specific consequences
Many contracts include a variety of different provisions. There may be penalty clauses to deter late payments and restrictive covenants that theoretically protect a business’s trade secrets. The additional terms beyond the basics of the agreement between the parties are important aspects of a contractual business relationship. Without a written agreement affirming specific terms, there may only be a basic working relationship between the parties.
Even in cases where there is a previous working relationship or social relationship between the parties, establishing a written contract is preferable to relying entirely on a verbal agreement. In the absence of a formal contract, written communications via email and text message can help validate the details of a business relationship.
Taking the time to commit terms to writing with custom contracts can help protect businesses and independent professionals from controversy, conflict and misconduct. Business litigation may be necessary in cases where one party fails to fulfill their obligations according to a verbal agreement or written contract.