In business, not every deal needs to be in writing, but knowing when you do need a written contract can mean the difference between an agreement that holds up in court or falls apart. Therefore, it is advisable that contracts be in writing, for three key reasons.

First, and most importantly, the law may require it. The Statute of Frauds is a legal principle that requires certain contracts to be in writing to be legally enforceable. It exists in most states but can vary in its specific requirements. Nevertheless, states do adhere to several core categories such as contracts dealing in real estate and those that cannot be performed within one year. Most states have also adopted the Uniform Commercial Code (UCC)– a collection of laws and rules for businesses governing commercial contracts for the sale of goods. The UCC requires that, in the commercial context, the purchase and sale of goods involving a value of $500 or more must be in writing.

Second, while oral contracts can be valid in certain situations, they are exceedingly difficult to defend when it becomes one business owner’s word against another entrepreneur or client. A written contract is not only proof that the agreement exists but also provides a clear record of the terms of the agreement and reduces the risk of disputes.

Third, reducing an agreement to writing forces each party to carefully consider their roles and responsibilities before becoming legally bound. It is far too easy to shake hands on a venture without thinking it through. The act of writing down the particulars and taking the time to consider each term offers room for important and necessary reflection on the deal.

For these reasons, and more, oral contracts should be entered into with caution. Only a written contract can truly secure an individual’s interests and strengthen enforceability under the law.

(This blog, prepared by Campanella Law Office, is for general informational purposes only and is not intended to convey specific legal advice, nor is it intended to create or constitute an attorney-client relationship.)