Agreements are a part of every business. While most agreements are formed without a hitch, the consequences of simple mistakes can cause major headaches and be costly for your business. Here are some issues to think about and potentially avoid some very big problems.
Agreements can be legally binding despite being extremely informal
A common mistake in agreements is thinking that informal agreements aren’t legally binding. In fact, nearly all agreements that relate to businesses or organisations will be legally binding. Agreements can be identified by simply establishing that two parties agree to perform promises to each other, and that the contract has legal value (known as consideration). Agreements that are straightforward and legally binding have been established in some of the most informal situations possible, such as verbal or handshake agreements that don’t feature in any written components. Even with little or no written agreement, parties can still produce evidence to convince a court an agreement can be legally enforced.
Doing business your way is important. But informal arrangements can still lead to formal agreements that are legally binding on you when disputes arise. Disputes over informal agreements can lead to messy legal battles over what people can and can’t prove. It can also be the end of relationships that can otherwise be salvageable and productive.
Performance may be all you need to find the existence of a contract
People in a hurry may forget to sign contracts in the process of beginning work. Other times, people deliberately leave signatures off a document to try to avoid being held to the agreement. In Australia, partial performance of a contract, even unsigned, is considered acceptance to be bound to the obligations of a contract. Therefore commencing work can potentially make you a party to an agreement which ultimately isn’t in your best interests.
Commencing work without a considered agreement can expose businesses to major issues and lead to uncertainty. Terms and conditions which clearly outline the parties rights and obligations are essential. Your agreement should deal with matters such as the scope of works, payment for the works, what occurs if a dispute occurs, or when your business partner faces financial difficulties. You can avoid significant risk if you receive advice when considering your options.
An uncertain agreement isn’t an agreement
It’s common for people to leave terms or numbers on an agreement blank or to be decided on later. What many aren’t aware of is that these uncertain terms in contracts expose their agreements to a high level of risk. Courts have thrown out entire or significant amounts of agreements because of their uncertain or incomplete nature, leaving many exposed to what’s left of an agreement they may no longer want part of but are stuck fulfilling.
Uncertain agreements present large amounts of risk but can be resolved with legal advice.
Seeking legal advice early is important. At Cohen Legal we believe in a holistic approach to providing legal services focused on the best commercial outcome for clients in all aspects of their businesses. We enjoy a collaborative approach working with clients in their business to achieve those outcomes by providing tailored advice based on your businesses goals and needs before you sign.