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Do Contracts Have to Be In Writing?

Do Contracts Have to Be In Writing?

As a business, you will enter into contracts frequently. However, they don't always have to be in writing. Read this article to find out more.

20th June 2019

Businesses enter into different contracts to regulate their daily transactions. Particularly, they use employment contracts, commercial contracts and even contracts relating to independent contractors. What you need to know about enforceable contracts is that they do not always have to be in writing. Contracts can be valid if they’re written, verbal or even made with a handshake. They are valid as long as the main elements of a contract exist which include agreement, consideration, capacity, intention and certainty.

In this article, we’ll talk about verbal contracts and when they can and can’t be enforced.

Types of Enforceable Contracts

Simple Contracts: Oral

Many informal contracts are made verbally without anything in writing. Your business is likely to be dealing with many clients everyday, so you must ensure you remember your oral agreements. Oral contracts are more difficult to enforce in Court because there is no written record of the agreement. In situations of conflict, it may be beneficial for you to have something in writing of the agreement rather than relying on your memory. However, the court can still enforce such a contract so do not make any promises that you cannot keep.

Formal Contracts: In Writing

In some situations, the law demands a written contract. An example of this is in the sale of land and real estate cases. Written contracts are definitely the safest type of contract to have because they clearly outline your agreement with the other party. They are the most enforceable contracts. It acts as a documented proof which you can refer to in case of any conflicts that may arise. If you hire employees, having a written employment contract will allow your employees to know their rights and your expectations.

Standard Form Contracts

These contracts tend to be preprepared and include a lot of fine print that you might not understand. Before you enter such contracts, you must ensure that you see a lawyer to know exactly what you are agreeing to. These types of contracts aim to benefit the person who has created them and not so much to the person signing them.

Contracts That Don’t Work

Unenforceable Contracts

There are situations in which a contract may be valid but cannot be enforced. This happens in cases where the statute demands some form of writing but this is absent in the contract.

Voidable but Enforceable Contracts

In these contracts, the validity of the consent given by one party to the other is questioned. If any terms of the contract have been misrepresented to you, or you were under someone’s influence when you signed it, the contract becomes void. However, if you signed something without reading and understanding it properly, you will still be bound by it.

Don’t Forget…

Whenever you are intending on entering a contract with someone, be sure of exactly what you want from it. Make sure you and the other party is agreeing on the same terms. It is important for businesses to understand the contracts that they are issuing and signing to avoid conflicts. Any legal disputes can impact the company’s reputation and do monetary damage.


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Author
Aditi Ramesh

Aditi currently works in the Content Team as a Legal Intern for Lawpath. She is in her third year of a Bachelor of Law and Bachelor of Commerce (Accounting) at Macquarie University. She is particularly interested in Property and Criminal Law.