In running a business, it’s important to use written contracts.
It’s easy to negotiate an agreement verbally, but this often leaves loose ends that become a problem later.
A written contract makes clear the responsibilities and duties of both parties and what each owes the other.
It’s often the case that both sides make assumptions underlying the agreement and those assumptions conflict with each other.
A contract includes both the agreement and the consideration.
Consideration is some value that is paid for the services rendered or the product delivered.
If there’s no consideration, then the service is considered a gift.
Written contracts are required for any sale over $500, any lease over $1000, and anything that creates a security interest such as pledging real estate.
There are several advantages to written contracts.
It is easier to enforce a written contract.
Signing a contract indicates that both parties have agreed to it.
Verbal contracts are often nullified when one side or the other claims they didn’t agree.
Written contracts provide better recourse than verbal contracts with the courts and arbitration.
Make sure you put it in writing.
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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.