Many, if not most, business lawsuits could have been avoided if the parties involved had their agreements been memorialized in writing. Relying on merely oral agreements can give rise to expensive litigation for two reasons:
- As between honest business persons, they may simply have different recollections about what was agreed upon in the first place.
- If a dishonest person is involved, he may be willing to lie about the agreement in order to obtain an unfair financial advantage.
Contact a licensed business litigation lawyer business people can turn to, for a more comprehensive explanation of the danger of verbal agreements in business.
In very simple business agreements, it is usually unnecessary to have an attorney draw up the agreement. For example, assume that Smith Construction wishes to purchase 8 cubic yards of crushed stone gravel each month for a period of 12 months from the ABC Quarry Company. This contract would not be over one paragraph long and would not require an attorney to prepare. Yet, this simple agreement could avoid a costly lawsuit if the quarry started delivering pea gravel instead of crushed gravel.
Often the requirement of a written agreement can be accomplished by using written forms, either purchased from a stationery company or having the initial template prepared by an attorney, which can be used multiple times without incurring additional attorney fees.
Complex agreements, such as the forming of a corporation or limited liability company (LLC) should probably be drafted by an attorney, however. After all, this is an agreement that will be utilized for many years, and the initial attorney fees are a prudent investment to avoid future disagreements and misunderstandings.
In addition to the initial contract or agreement between the parties, it is important that a “paper trail” be kept when there are any changes or revisions to the parties’ agreement. For example, assume that Apex Construction Company is building a home for John and Mary Smith. Shortly after construction begins, the Smiths decide that they wish to have an enclosed porch added to the project. At that point, the Smiths and the contractor should write up a brief “change order” reflecting the addition of the porch and exactly how much the total cost of the house will be increased.
Today’s computer technology makes keeping a “paper trail” more easy than any at time in the past. The term “paper trail” now encompasses the e-mails in addition to actual paper documents. These e-mails need not be lengthy or go into elaborate detail. Here are examples of e-mails in business dealings that can keep you out of court:
— “Mr. Anderson, this will confirm that painting of the building will be delayed 3 days because of the approaching tropical storm.”
— “Ms. Browne, we had agreed that 4X4s would be used in the home framing, not 2X4s; please replace as soon as possible.”
— “Charlie, thanks for sending over the additional 400 cubic yards of concrete. We will pay the agreed price of $100 per cubic yard.”
Keeping a good paper trail not only helps keep a business out of court but, in the event of a lawsuit, provides powerful evidence to prevail at trial.