Why written agreements are important
Written agreements offer clarity and certainty. Verbal agreements, however, are often not accurate as memories fade, one party’s version may be different from the other’s and, as time lapses, circumstances change and parties’ intentions change too.
When the terms of what have been agreed fail to be recorded in written form, this opens the door for dispute. Consider this: you have been engaged by a business to perform work for the business. In the absence of a written agreement, a key question is whether you have been hired as an employee or a contractor (or something else). Each of these different relationships have significantly different legal, tax and financial implications both for you and the business.
When a dispute arises and there is significant disagreement between the parties, one thing is certain – parties often resort to litigation which is costly and time consuming. Instead, have a written agreement which defines what has been agreed and that legal proves the agreement and its terms.
Written agreements provide protection for the parties so that they are aware of the capacity in which they enter the agreement, the obligations imposed on them and their rights and entitlements. Written agreements are usually enforceable unless there are factors which nullify or invalidate them.
A written agreement, however, cannot ‘make’ someone an independent contractor. A person is or is not an employee or independent contractor based on applicable legal tests. The parties agreeing that a party is an employee or an independent contractor is not the point. Nevertheless, a written agreement can still serve as important documentation to support employee or contractor status.
Even with a written agreement in place, a court can still look behind the document to define the true relationship between the parties. The terms of the written agreement, however, serve as a first point of evidence for a court to assess the facts in any litigation. That is, the written terms give guidance to a court and, to a certain extent, limit ambiguity if terms have been drafted correctly.
As you can see, the benefits of a detailed, clear and well written agreement are many. It should always be a basic principle and best business practice to enter into written agreements with parties you intend to have dealings with – whether they be contractors, employees, customers, suppliers, partners, shareholders or even investors.
The team of lawyers from our Commercial & Disputes Division are highly experienced and can provide advice on any matters pertaining to agreements you may need reviewed and refreshed or have prepared from scratch.
Insight written by Elizabeth Ong & Meghan Warren