The Importance of a Written Contract in Business Transactions in Maryland, Virginia, and Washington DC
Why do I need a Written Contract in Maryland, Virginia, and Washington DC?
Times change, needs change, people change and memories fade. Therefore, when making a personal or business deal it is important to memorialize the terms in writing. Properly drafted written contracts preserve the understanding of the parties as to their rights and responsibilities, spells out who gets what benefit for what cost and sets up a mechanism as to how the contract can be ended and under what circumstances.
When it comes to business transactions, you should have written contracts for every important relationship, including those with suppliers, distributors, retailers, parties providing professional services and key employees. If you are starting a business, a written agreement among partners or shareholders can be critical for the companys long-term survival. At some point there will be disagreements, perhaps some kind of power struggle, especially if the business is doing particularly well (and everyone wants to be paid for what they think theyre entitled to) or particularly poorly (no one wants responsibility for debts).
A written contract will protect you from potential legal claims, including those claiming that you breached an oral or implied contract. The writing will also help you if it is the other party breached an agreement.
One example is the spectacularly successful social media company Snapchat. Its founders, two Stanford University students, who started the business with a handshake, ended up in court, according to the Los Angeles Times.
The situation, as described in fired co-founder Reggie Browns lawsuit, started when he told Evan Spiegel (the company’s 24-year-old CEO), his idea about enabling people to share photos that will self-destruct after viewing. A third partner, Bobby Murphy (Snapchat’s chief technology officer), did the computer programming. An oral agreement regarding the business was made between the three
Spiegel soon decided that Brown was not up to the job and he and Murphy locked him out of the company’s systems and disavowed him. As Brown worked an unpaid job elsewhere, Snapchat received $1 billion plus takeover offers from Facebook. In February 2013 Brown sued his former partners and the companys venture capitalists for breach of contract. They reached an undisclosed settlement last summer.
There is no guaranty a written contract will keep you out of court, but it could greatly reduce the chances of that happening. If you own a business in the Maryland and Washington, DC area and have questions about contract law or are currently dealing with a contract dispute situation, the business law attorneys at Longman & Van Grack can help. Call us at (301) 291-5027 today. We have offices in Bethesda and Rockville, Maryland; Washington, DC; and Virginia.
