Written contract: Overview, definition, and example
What is a written contract?
A written contract is a formal agreement between two or more parties that is documented in writing and signed by all parties involved. It outlines the terms, obligations, and responsibilities of each party and serves as proof of the agreement. A written contract can cover a wide range of topics, such as business transactions, employment, leases, and services. The key feature of a written contract is that it provides a clear record of the agreement, which can be referred to in case of disputes or misunderstandings.
In simpler terms, a written contract is a document that records the terms of an agreement and is signed by all involved parties to show they agree to those terms.
Why is a written contract important?
A written contract is important because it provides clarity and legal protection for all parties involved. By putting the terms of an agreement in writing, it reduces the risk of misunderstandings and ensures that everyone knows what is expected of them. If a dispute arises, a written contract serves as evidence in legal proceedings, making it easier to enforce the terms. Additionally, a written contract can help ensure compliance with laws and regulations.
For SMB owners, having a written contract is essential for protecting the business, ensuring that all parties understand their rights and obligations, and providing a clear course of action if things go wrong.
Understanding written contract through an example
Imagine you hire a freelancer to design a logo for your business. To avoid confusion, you both sign a written contract that outlines the scope of the work, deadlines, payment terms, and intellectual property rights. The contract makes it clear that the logo will be delivered by a specific date and that the freelancer will be paid upon completion. If any issues arise, such as the freelancer missing the deadline or not meeting the specifications, you can refer back to the written contract to resolve the dispute.
In this case, the written contract provides a clear understanding of both parties' expectations and offers protection in case something goes wrong.
Example of a written contract clause
Here’s an example of what a written contract clause might look like in an agreement:
“The Contractor agrees to complete the design of the logo by [deadline], according to the specifications outlined in Exhibit A. Payment of [$X] will be made upon delivery of the completed logo. If the Contractor fails to meet the deadline or does not deliver the work as agreed, the Client may seek a refund or require the Contractor to redo the work at no additional cost.”
Conclusion
A written contract is a crucial tool in business agreements, providing clarity, legal protection, and a clear record of the terms agreed upon by all parties. For SMB owners, using written contracts helps minimize risks, ensures compliance, and provides a structured framework for resolving disputes if they arise. Whether you're entering into a contract with a supplier, client, or employee, having everything in writing ensures that all parties are on the same page and legally protected.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.