As a Business Owner, you are constantly entering into all kinds of agreements with a variety of people; your IT service provider, your employee, the newest investor, a new partner… And the list just goes on. This is a good thing because it means that your business is moving to its permanent site (whatever that means).
So naturally you will have lots of questions swirling in your mind such as.
- Are oral agreements safe and enforceable?
- Should all agreements be in writing?
- Who should sign an agreement?
These essential questions relating to contracts deserve to be clarified. More so, when every human relations in this present age requires some form of contract.
Below, I have provided answers to the frequently asked questions business owners have regarding business contracts.
1. Entered Into An Oral Agreement With Someone, Do I Still Need To Put It Down In Writing? So long as it is not to transfer Copyrights, for a Sale of Interest in Land, or a contract of guarantee; an oral agreement is totally binding between the parties that agrees to it. Therefore, it need not be reduced to writing. However, in the event of conflict, oral agreements due to their unwritten nature are difficult to rely on. This is unlike a written contract where you have all the terms expressly written.
Note that whether the contract is written or oral, there must be a clear and definite Offer, an acceptance of the offer and a legal Consideration. (Consideration means that you are gaining something from the contract, no matter how small). Also, there must be a mutual intention between the parties to enter into the agreement.
2. I Don’t Really Like Written Agreements, It is Rather Too Formal.
By all means, a business agreement should be as formal as possible. That means writing down agreements that affects your business and appending the right signature. It not only protects your business from potential troubles, it will also ensure that everything is clearly stated such that everyone understands his/her responsibility. This is the kind of peace of mind that you and your business need in order to focus on growing your business.
3. I Really Trust This My Guy, Do I still Need A Contract?
Your guy may be trustworthy but our memory can fail us at any time. Having a written contract will ensure that all the parties always have a clear and constant reminder of duties and responsibilities required of each party. It is meant to reduce dispute and maintain a good business relationships not to worsen it.
4. Contracts Are Useless In Nigeria Because You Cannot Rely On It When There Is A Breach Unfortunately, this is a common perception in Nigeria. As a result, businesses lose millions of naira due to unfulfilled contracts. The truth is that you can always rely on your contracts when it is breached especially when there is a written evidence of the contract. The commonest way to seek remedy when there is a contract breach (when informal resolution fails) is through lawsuits and court trials. But then, the beauty of contracts (especially written contracts) is that if both parties are genuine and open to communication, it often doesn’t have to come down to a court trial. You can choose in your contract document to submit any dispute first to a third party mediation panel or other alternative dispute resolution mechanism that are more cordial and faster than a regular court trial. Any decision reached would be binding on both parties since the court recognizes and would enforce decisions made by such body.
In any case, when attempting to enforce a contract, you should always consider the effect any dispute will have on any long-term business relationship between the parties involved.
5. I Would Love A Written Contract, But The Grammar Is Too Much.
While your lawyer can work to make the grammar used in contract documents as simplified as possible, it is always in your best interest to capture in writing all the necessary situations that may arise from your particular agreement.
6. I Made An Oral Agreement With Someone, Am I Obligated To Fulfill My Own Part Of The Contract? As a Gentleman/Lady that you are, the answer is a “Yes”. So long as there is a clear offer, an acceptance of the offer and there is a consideration. Oh! and one more thing………So long as the contract is not illegal.
7. Can I Write/Draft My Own Contracts? Yes, you can write your own contracts. If there is much at stake or if the matter is complex, you may want to use a lawyer. Your best money may be spent up front in preventing any potential legal problems, rather than battling it out in a lawsuit later. If the amount at stake in your business contract is moderate or the terms simple, you may use a legal form that both parties understand.
8. How Do I Sign A Contract? Signing contracts correctly is important because it can greatly affect whether the contract is enforceable and who is on the hook. Certain types of contract require the use of seals irrespective of who is party (individual or company) to the contract. E.g A lease agreement that is above 3 years, contract for sale of land, power of attorney, etc.
In any case, if you’re doing business as a sole proprietor, then you as an individual should sign the contract.
When you sign a contract on behalf of your company/business, you can’t just sign your name or your business’ name. Instead, you will need to sign as an authorized agent of your company. So make sure the signature line clearly lists your name and title and states that you’re signing “on-behalf of” your company, which you should identify by name. If you sign as yourself, you could be personally liable for any lawsuits that arise from the contract.
Conversely, Where you enter into a business agreement with a company, ensure that the person signing the contract on-behalf of the company has a ‘clear’ or at least an ‘apparent’ authority to do so.
Did I miss some of the questions that you may have regarding business contracts? Drop your comment below. Or email me @: firstname.lastname@example.org.
Chinemerem is a Lawyer at Millennia Legal, Virtual Law Firm where she helps SMEs by providing solutions to both simple and complex legal issue SMEs face everyday.