Why You Should Never Transact Business Without an Attorney Drafted Contract?

A business contract is a legally binding document between two or more persons or companies. It is commonly employed by companies and small businesses to clarify their business relationships and introduce certainty into their transactions.

Business can be highly unpredictable, as the current COVID-19 pandemic shows. This is why business owners choose to draft written contracts that clearly spell out their obligations and rights in the business relationship.

Without written contracts of this nature, transacting with other individuals becomes very risky, since proving the existence of the contract or enforcing it will rely only on the good faith of the parties.

To avoid this risk, especially where critical business funds are involved, business owners choose to draft comprehensive business contracts.

If youre still wondering whether you really need a contract for that transaction, this article explains why you do. We also explain what kinds of business contracts you can have drafted and why it makes the most sense to engage an attorney to draft your business contracts.

Importance of having business contracts drafted
A written contract is very important in any business agreement or transaction. Contracts serve as proof in the occasion of any misunderstanding between the parties. They can also be used as reference documents to clear up confusion. Some of the other benefits of drafting business contracts include the following:
  • Assured confidentiality: One benefit of having written contracts in business agreements is that it can afford you confidentiality. It provides for non-disclosure clauses that protect sensitive matter. In the agreement, all parties concerned are legally bound to withhold from unconcerned parties, the transactions involved and the details of their agreement. Any party that violates this non-disclosure agreement, can be held liable under the agreement.
  • Avoiding misunderstandings: A written contract is usually drafted when two or more parties have decided to enter into a business agreement. The main purpose of this formal contract is to outline their goals, wishes and general expectations. All parties have a chance to read through the terms and conditions and iron out every wrinkle and thus eliminate misunderstandings. The contract will serve as a reminder of the business agreement for both parties.
  • Official Record: Business contracts are often used as official records stating what the concerned parties have agreed upon and when this agreement was done.
  • Proof of details: Written business contracts can legally serve as proof of what you and all parties involved agreed upon. If there is a dispute as to the obligations of either party, the contract serves as a reliable witness to what was said and done. It is usually necessary to make sure the contract is comprehensive to ensure that it can hold water as solid legal proof.
  • Security: Business contracts provide security and peace of mind to the parties involved. It gives sufficient protection to the parties involved if the agreed terms and conditions are ignored or breached. For example, an employer is responsible by law to adhere to the payment of his employees income and other benefits specified in their contract. The employee will also be required to carry out their duties as specified in the job description. If any of the parties fail in this, the other party will have recourse to remedies stipulated in the contract.

Common types of business contracts
There are different types of business contracts that companies and individuals employ in the normal course of business. These business contracts usually fall under three main categories including: sales-related contracts, employment contracts and general business contracts.

Sales-Related Contracts
These are law-based agreements that govern how goods, services and other property should be sold and bought. It also covers the legal patchwork of how ownership can be further transferred if necessary. Common sales-related contracts include the following:
  • Contract of Sale: A contract of sale is a legal document that shows goods or services have been transferred between parties. It usually contains such terms as the price of the transfer, when it occurred or is expected to occur and what either party can do if it fails to occur.
  • Option Agreement: This is a legally binding agreement that one party grant a right to the other party to sell or buy an asset with an agreed-upon price and the transaction date in future.

Employment Contracts
Employment contracts carefully outline every aspect of the employment and provides a degree of legal protection for both employee and employer. Some employment contracts are as follows:
  • General Employment Contract: This specifically outlines what is expected of an employee. These include, working relationship, duration, grounds for termination, benefits, compensation and every other thing related to the business and employment.
  • Non-compete Agreement: This agreement deals with a specified period of time in which an employee cannot compete with a business after leaving the company. It is used to protect the legitimate interests of the employer.
  • Non Disclosure Agreement: This contract prevents a business partner from spilling sensitive information to third parties.

General Business Contracts
General business contracts govern high-level issues such as business structure, agreements to establish a business and how stakeholders are protected. These include:
  • Shareholders Agreement: This outlines the rights and obligations among the shareholders of a company.
  • Partnership Agreement: This spells out the terms of partnership as well as their obligations and contributions.
  • Indemnity Agreement: This is a part of the contract in which an individual agrees to indemnify or reimburse another person for damages that occur as a result of an agreement.
  • Property and Equipment Lease Agreement: This outlines the terms and conditions of a lease for a building or equipment. This also includes monthly or annual payments, maintenance agreements, deposits and other items.
Why a lawyer should help draft your business contracts
Due to the speed and easy access to information that the internet brings, it is common to see online platforms that promise templates for every kind of business contract. However, this often proves far more detrimental to businesses in the long run than they can possibly suspect.
One thing that most fail to appreciate is that business relationships are as unique and different as the fingerprints of humans. No transaction is the same, and as a result, each one requires a unique agreement.
As a result, using a free template that does not really address the specific of your transaction will be much like trying to use a spoon in place of a knife.
Deciding not to hire a lawyer to help with your business contract can seem cost-effective at first. However, it will cost you far much more in the long run when you begin to face problems from the faulty agreement, and may even threaten the existence of your business. Here are some other reasons why you should get an attorney involved in drafting your business contracts:
  • Clarity of obligations: Contracts are binding documents and the general rule of law is that a person is bound by what they sign. Without the input of a lawyer, you may end up being legally bound on terms far different than you intended.
  • Ensure the validity of your agreement: Although most think contracts are just a written record of what passed between parties, they are usually much more. Instead, contracts operate as practical blueprints of what is acceptable by law. They can only contain such terms as the law permits, and this information is not always available to everyone. Further, the law changes, almost as often as the years pass. As a result, what was valid last year may no longer be valid this year. Having an experienced and knowledgeable attorney draft your agreement ensures that you stay current.
  • Avoid legal risks: Business is inherently risky. But one risk you should not have to suffer from are legal risks. Unfortunately, that is exactly what people do by relying on free-to-use templates that may be faulty. To be certain that your business is operating in the clear light of the law, be sure to contact a skilled lawyer to help with your agreements.

Reach out to us
There are so many ifs and maybes in the business world. Eliminate them by hiring us to assist with drafting your business contracts. Here at Alan Kang & Co, we routinely assist businesses and individuals in Malaysia with the task of clarifying and protecting their business relationships. We can help you too. Contact us on +603-7972 7223 to schedule a consultation today.

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