We've all done it before: you get a quote, you like what you hear and you shake on the terms.
Sure, it might help get the job done more quickly, save you legal and admin costs and more often than not you'll get exactly what you agreed to.
But every now and then an unexpected issue can rear its ugly head. Bad weather might kick in, sales targets might fall short of what was promised, or perhaps a quote balloons out to triple what you budgeted.
“Handshake agreements can also lead to a 'he said, she said' debate that racks up quite the legal bill. The biggest problem with oral contracts can be proving the terms of the contract if a dispute arises”
Is a handshake enough?
A handshake agreement is usually legally binding in Australia whether or not they involve big ticket items (one area where agreements have to be in writing is where they concern land).
However, handshake agreements can also lead to a 'he said, she said' debate that racks up quite the legal bill. The biggest problem with oral contracts can be proving the terms of the contract if a dispute arises. That's why it's best to always get your agreements in writing – so that each party is aware of their responsibilities.
We all know that contracts have a reputation for being quite long. But they don't always have to be.
In fact, a contract can be as small and simple as getting a quote on the back of an envelope. That said, you can (and should) do better than that for your business.
It’s well worth checking out local regulations and consulting a lawyer. But to begin with the Department of the Treasury points out that good contracts should cover exactly what is required by each party, the limits to what is required, payment terms and dealing with risk: what might go wrong in the relationship and how to safeguard against this.
The WA Government's Small Business website goes into more detail about what each of these points mean in reality, recommending the below structure:
Legalities and insurance
Once the contract is drawn up, there's a few extra boxes you need to tick off before you sign on the dotted line. First and foremost, it's a good idea to seek advice from your industry association, lawyer or business adviser.
These contractual liability clauses may increase your liability in the event of a claim and it is usual for insurers to not provide cover for this increased liability.
You should ensure you read the entire contract and understand it all. Check your contracts carefully for indemnities and seek the advice of a solicitor or your broker before you sign any contracts as this is a complex area. If in doubt, don’t sign it.
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