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Chris April 23, 2016

Contracts are essential parts of business and the law. In its simplest terms, a contract is an agreement between two or more people or organizations in which each makes a promise to another and that agreement is enforceable. It does not have to be in writing and most contracts are unwritten (or oral). Think of all of the consumer transactions you engage in every day. Few if any involve negotiating and signing a written agreement. Many businesses operate on an oral contract model, including major service providers such as landscapers, painters and auto mechanics. Certain contracts–such as real estate purchases, attorney fee agreements, home improvement contracts and others–are required by statutes or other rules to be in writing in order to be fully enforceable.

While a contract need not necessarily be in writing in order to be enforced in court, the absence of a written agreement may limit the damages the plaintiff you could claim and collect. The most significant damage is attorney fees. Sometimes customers or contractors do not pay for the goods and services a business provided. The business would most likely have to hire an attorney to file suit in order to collect them. The attorney, who most certainly has his or her own written fee agreement in place, will take a fee on the case and there may also be litigation expenses (depositions, copies, postage, investigation, etc.) incurred in the case. Without an attorney fee clause in the written contract or a statute, the plaintiff cannot tack on those costs to the case. Even if the plaintiff recovers all of the damages owed and certain costs (service and filing fees), it is still out the money spent on the case itself and in a worse position than had the contract been performed.

Written contracts also enable late fees, interest and other penalties for nonpayment to be enforceable. Additionally, a duly executed contract makes prosecuting a breach of contract case much easier. Businesses should seriously consider using one and should consult with an attorney for any drafting questions or issues.