Even when there is a long-standing relationship with another party, an informal agreement isn’t enough.
What is a contract?
A contract is a voluntary agreement between parties to perform a service, provide a product, or commit to an act. Written contracts are a very important part of any deal or business process as they are meant to outline each party’s rights and obligations.
The digital era has connected business partners across the globe, making formal, documented agreements even more necessary. Differences in language, and social and legal environments makes communicating expectations clearly ever more important. Modern business deals have made contracts more dynamic and complex than ever before – so much so that it is advisable for businesses of any size to operate with written contracts.
Benefits of a formal written contract:
- Outline each party’s responsibilities
- Preserves long-standing working relationships
- Enforces terms in a court of law; verbal agreements are not enforceable
- Safeguards company resources
- Assists in the event one party breaches an agreement
- Avoid expensive litigation proceedings
If you do not have a signed written contract, liability and monetary damages will be determined by a court. A signed written contract provides clear assignment of responsibilities and intent. Liability should ideally lie with the party that has most control over the hazards and exposures.
The effectiveness of a contract depends on governing law and case law interpretation. You should consult legal counsel for advice on the execution of contracts. Contact your agent to discuss insurance policy options.
Nationwide Loss Control Services has a Risk Transfer Interactive Guide available at MyLossControlServices.com. This resource will guide you through development of your own customized risk transfer program.