In the past, you may have entered into an agreement for a family friend to supply some essential items for your business. You shook hands on it, and as agreed, they delivered! That’s fine, right? No, it is not.
There are many possible scenarios in which that agreement would not have been honored and you would have been stuck with very few legal options. Imagine for example that your business competitor makes a higher and more lucrative offer on the items you agreed to buy. It is unnecessarily risky to solely rely on the “better nature” of your family friend.
Arrangements with relatives and friends are prime examples of situations where many small business owners think that written contracts are not needed. A similar situation is one involving small sums of money. In this case, please keep this in mind – without the clear parameters of a written contract, any dispute that may arise over the small business arrangement has the potential to snowball and do serious damage to your relationships.
If legal costs are the worry for you, it is prudent to say that absorbing modest costs at the beginning of an arrangement in order to forestall typically costly and time-consuming litigation in the future is never a foolish move.
Moreover, you should be mindful that Michigan law restricts the range of arrangements that can be subject to an oral (unwritten, or “handshake”) contract. Under the law, you cannot orally contract for the following things: an agreement to be performed one year in the future; agreements regarding the sale of an interest in real estate; a promise to satisfy the debts of another, etc.
A written contract which clearly spells out your intentions and expectations is a good way to preserve your relationships, gives you peace of mind, empowers you with stronger legal options, and in the long run is a more cost-effective route than oral contracts. But the conventional wisdom still holds true: you must be careful what you sign. So, before you offer, or sign a contract for your business, consider giving us a call and we will work to ensure that your interests are protected.