Contract law is founded upon a simple and patently reasonable premise.
Your word is your bond.
Over the course of a lifetime, you will enter into countless agreements.
Some will be formally documented.
Some will not.
Formal agreements are more often found where the parties are dealing at arms length, third parties are involved, or where there is insufficient mutual trust and respect to rely on good faith alone.
Informal agreements tend to arise in different circumstances.
They are often made between family members, friends, business partners, neighbours, or long-standing commercial contacts. In those circumstances, the parties may consider a written agreement unnecessary, awkward, or even offensive.
There may be a genuine meeting of minds at the time. Each party may honestly believe they understand what has been agreed.
The agreement may be sealed by nothing more than a handshake.
That is often the problem.
Ironically, the agreements which the parties never thought necessary to write down are often the agreements most likely to descend into disagreement, bickering, and ultimately, litigation.
The reason is simple. Life changes.
People separate. People divorce. People become ill. People die. Businesses fail. Financial pressure emerges. Priorities change.
What once seemed obvious can later become contested. What one party recalls as a clear promise, the other may remember as a negotiation, a gesture of goodwill, or something subject to further discussion or agreement.
Rarely, in those circumstances, have the parties negotiated or entered into a formal contract. More often, the terms were simply “obvious at the time”.
But what is obvious at the time is often not so years later.
When a dispute arises, the parties are often forced to ask a third party, for instance, a judge, to determine what, in fact, was agreed.
At that point, the question is no longer whether the parties trusted each other. The question is what can be proved.
Emails, text messages, bank transfers, invoices, diary notes, conversations, and conduct may all become relevant.
All of them are useful. None more so than a contemporaneous, written record.
Not every agreement requires a lengthy formal contract. It does not. The key take-away is that important agreements should be recorded with sufficient clarity before memories fade, relationships change, and positions harden.
Who were the parties? What exactly was promised? When was performance required? Was money payable? Was ownership intended to pass? Was the arrangement temporary or permanent? What was to happen if one party did not perform?
Those questions are much easier to answer when the agreement was recorded at the time.
Writing an agreement down does not evince mistrust.
In many cases, it is what protects the relationship. It gives each party a common reference point. It reduces uncertainty. It makes expectations clear before there is a dispute.
Ultimately, the cost of properly documenting an agreement often pales in comparison to the cost of failing to do so.
For legal assistance preparing agreements or resolving disputes, contact Wadlow Solicitors or call us on (08) 8212 2955 and schedule an appointment with Luke Barnett.
