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Why Do We Need to Put Our Agreement in Writing?

June 17, 2013

Posted in Business Litigation, Business Start Ups

OKTo be honest, even as an attorney, sometimes I don’t put the agreement in writing. Sometimes, the circumstances just make it impractical to put the engagement in writing. Other times, the assignment is just too small, and I don’t want to spend time memorializing the oral agreement. On other occasions, I’m doing work for friends, and I don’t want to be perceived as not trusting my own friends. However, this decision has led to mistakes. Luckily, they weren’t costly. Soon, enough mistakes accrued to help me realize the importance of having a written agreement.

Contrary to the advice from most attorneys, having a written agreement is not just needed because you don’t trust others. Instead, it’s to make sure that both of you have a “meeting of the minds.” In other words, both of you need to know if everyone is agreed to the same terms or have the same expectations of the obligations under the contract.

Before, I used to feel uneasy asking a friend to sign a retainer agreement because I didn’t want to be perceived as someone who wasn’t trusting of others, especially my own friends. However, throughout the years, I have learned to look at the situation differently. I now believe that the written agreement is something that I can use to make sure my friends and I are agreeing to the same thing. I want to make sure that my friend has the same expectation about the scope of the services that I can perform as I do. Without knowing the expectations of others, I can’t effectively perform my job, and I could lose a friend in the process. Often, I advise my clients in a business or real estate transaction to use the contract as a checklist and to make sure that each item on the contract was discussed. This helps make sure that everyone knows what was agreed to and what is expected. Doing this eliminates most of the surprises at the end.

Additionally, our memories are imperfect as humans, and sometimes, they even fade. Thus, although we are clear about our agreement today, we may not remember all the details six months from now. The written agreement will help us to recall what the parties agreed to previously. It serves as a reference point that we can go back to for determining whether either party has deviated from duties or obligations under the contract.

For example, in my own experience, there was a time I agreed to do a small assignment for a friend. I quoted him a flat fee, plus the filing fee. He honestly thought that the flat fee quoted included the filing fee. Unfortunately, we did not have the written agreement to reference. Luckily, the engagement was a small one, and we were able to work it out. However, it could be a costly dispute, especially when the transaction deals with thousands of dollars.

I was the fortunate one because there were no costly disputes that occurred from my failure to memorialize the verbal agreement, and I made enough mistakes to realize the importance of having an agreement in writing regardless of the circumstances. I also learned that asking to put the agreement in writing is really making sure that both of you have the same understanding instead of not trusting other person, for the most part. Don’t get me wrong; sometimes, you want to have the contract in writing to prevent the other party from unilaterally changing the terms. What I am saying is that you shouldn’t feel uneasy about asking to put the agreement in writing, because you’re most often helping everyone to make sure that you have the same understanding. Reducing the chance of having a costly dispute is one of the benefits.

If you have any questions about a contract that you’ve entered or about the rights and obligations of the parties on the contract, you need to consult with an experienced business attorney. We are business attorneys with extensive trial experience representing clients in business, commercial, real estate, and shareholder/partnership matters. Call the Law Offices of Tony T. Liu to have your questions answered today.