You never need them until you need them. But when there is a legal issue, you realize how important it is to have it written down. Many small business owners think that they do not use agreements or contracts in their business. Since their business transactions are quick, they believe it is not necessary to have an written agreement. Every transaction is an agreement and every agreement has terms; regardless if in writing or not. If you do not set the terms in a transaction, terms are set by the law.
What needs to be in the contract?
Now that have you realized you need a contract what should be in this contract? Your contract should have clear terms. It should answer these questions:
How long is the term (time frame) of the contract,
How much is it going to cost,
Who is responsible for what costs, and
What is the warranty or guarantee.
The Contract should include a statement that the written contract is the entire agreement between the Buyer and the Seller.
If you have a contract use it. Put it on the back of the receipt or purchase order form. If a contract is required to be filled out and signed by the customer, pre print forms and have the customer sign the contract. File the contract away so you can retrieve it if it is necessary. Keep your contracts updated. If it is an annual contract, then every year get a new contract signed. Develop a system to track when your contract needs to be renewed and keep your contracts updated.
What it means when you sign a contract
Every business owner signs contracts, leases and agreements. However few ever read them until there is a problem. Stop and read the contract before you sign it. There are several things that you need to look for:
The term or length of time the contract is for.
Is it what you were told or is it different.
Does it automatically renew?
If so when is the deadline for giving notice to terminate the contract.
Can you terminate the contract? If so what are the penalties.
And one that seems to get a lot of people on leases what are the penalties clause at the end of the lease?
Read the contract and if it doesn’t say what you were told change it. You can mark through a line in a contract or add a handwritten sentence to the contract. As long as both parties sign the contract any deletion or addition becomes part of the contract.
The take away from this, is to have written contracts, use the written contracts, have a system for storing and renewing the contracts and finally read any contract before you sign it.