1. Written and Verbal Contracts
2. Drafting and Finalizing Contracts

Are you wondering how to start a contract? It begins with an agreement between parties that want to work together. A contract can be written or verbal and is used to establish a well-defined agreement between a company and their client, it is legally binding. A work contract reduces risks for all involved parties by establishing the details and terms of the agreement including:

  • Details of the project to be completed.
  • All pricing and payment terms.
  • Estimated time requirements of the project.

A contract is also used to deal with risks, including:

  • Delays that are outside the control of the parties.
  • Which party is responsible for purchasing insurance.
  • How to handle if liens by subcontractors or suppliers are recorded.

Establishing these parameters should always be set before any work begins when parties are working together to reach an agreement. If issues appear after the work has begun, the parties will be less likely to work together to find a resolution. Also, any work should not begin until a contract has been fully agreed to, signed and dated by the parties involved.

Written and Verbal Contracts

A written contract reduces the risk of misunderstanding between the parties. Many businesses do not like the costs associated with having a contract drafted by a legal professional, but it reduces the cost of disputes that may arise in the future if a contract is not put in place. Refer to the state laws pertaining to the statute of frauds to determine if a contract must be in writing such as loans, credit cards, and real estate contracts like mortgages.

A contract is not always required to be in writing to be legally binding. A verbal contract is binding and seen as complete when the terms and conditions have been met and agreed to. If all of the terms and conditions are not fully agreed to it is seen as incomplete. A way to protect yourself in a verbal contract is to send an email that details the terms and conditions and request that the other party responds with an affirmative answer to the email. This will help deal with any disputes.

A breach of contract can be taken to court, but in the case of verbal contracts they are harder to enforce legally. Additional documentation should be produced to enforce the terms agreed to verbally. In some cases, this documentation may include email correspondence between the parties, phone calls or documented meetings. If the email shows a clear offer, with terms and conditions that are accepted by the other party, it can be considered a legal, valid contract. To avoid the additional stress of proving a verbal contract, written contracts are recommended to protect yourself and any assets that will be used in the project.

Whether written or verbal, consumer law may be used to help solve the dispute. In the case of goods being sold, the law will favor the buyer if goods are not delivered. Consumer laws also protect those who provide services as well.

Drafting and Finalizing Contracts

If your business is going to utilize written agreements, it is recommended to use professional legal counsel who is knowledgeable in business, commercial, or the law related to your industry. By using a skilled professional, you limit the possibility of contracts that are poorly written or have unintentional loopholes.

Before any work begins, contracts should also be signed by all parties. In some cases, electronic signatures may be used. In some jurisdictions contracts may not use electronic signatures, including divorces, wills, and evictions. Some parties may prefer to have witnesses or a notary present as extra protection to show all parties understand and agree to the terms and conditions of the contract. Copies of the signed contracts should be given to all parties. With the increase in cloud computing, it has also become much harder to lose or damage these contracts.

In some situations, businesses will expect partial payment before they begin any work or the delivery of any goods to eliminate the issue of nonpayment. By doing so, it is easier to spot companies who never intended to pay.

If you need help with understanding how to start a contract, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.