Contracts can be long and drawn out and often loaded with legal jargon and small print, but while they aren’t very exciting, they are necessary in business for a number of reasons. Here are just a few you should be aware of:
1. They are proof of the original agreement
This is one of the most important reasons for using contracts in business. When all parties read and sign an agreement they do on the basis that they understand and agree to the details within it. This includes their obligations to you and your obligations to them. In terms of employment, it also includes information like job benefits, holidays, hours and rules about sickness. If there is ever a dispute, the contract is one of the first things lawyers will look at.
2. It can protect your company’s sensitive information
When sensitive information is shared in meetings or via your company’s records, you don’t want it being shared with the general public or your competitors. As such, when it is shared with employees, colleagues or potential partners then it is important to ensure that everyone involved signs a non-disclosure agreement. This legally binds all involved to keep private any secrets and information shared among the agreed parties. If this agreement is broken then the person(s) who breaks it will be liable.
3. It prevents misunderstandings and confusion
When everything is in writing, it gives everyone the chance to understand what is expected from them and what they will receive in return. Prior to signing it, everyone involved can discuss each clause and raise any issues or questions they have regarding it. This is a good opportunity to iron out any problems or misunderstandings and ensure that everyone knows what they are agreeing to.
4. It offers security for all involved
When you sign a contract with a client or customer, you agree to provide the service or product by a designated date and they agree to pay you for your efforts. This gives both sides the security of knowing they will get what they want or the other party will be liable. Similarly, if you hire an employee to work for you either temporarily or a permanent basis a written contract helps them to feel secure about their job and any benefits that come with it. Moreover, it gives you the security of knowing that your employee has to fulfil their side of the agreement, work during the designated hours, and complete all tasks in their job description as required.
Contracts are especially helpful if you have an excellent employee who you don’t want to lose, either because you have spent money and time training them, or because they are experienced at what they do. They are a good way to prevent your competitors head hunting your best workers or staff leaving you when something better comes along. High staff turnover can be very expensive for a company especially if the job requires key skills or specific training. To ensure your contract is legal and easy to understand, it is best to hire an attorney to draw it up.