What are the Pros and Cons of Having a Contract? There are only three types of agreements in South African Law that MUST be in writing. Those three agreements are 1. Sale of Property (Land) Agreement 2. Surety Agreement (that’s when we agree to be held liable for someone else’s debt) and then lastly 3. A Will and Last Testament.

 

What I am trying to tell you, is that it is not compulsory for you to have a contract when doing business. It doesn’t make your business or what you do illegal because you don’t have a contract. The point is: if it is not compulsory to have a contract then what factors would you take into consideration when deciding to either have one or not? What are the pros or cons?

 

That’s what this post is all about: weighing up the pros and cons for you in deciding whether to have a contract or not. So let’s get to it:

 

PROS

1. Everyone is on the same page…literally

Having a contract allows you and your client to start your business relationship on the same page. Your client understands what you are committing to in terms of delivery and also what they are committing to in terms of payment. This is vital if you and your client are going to have a good business relationship where expectations are managed.

2. Premeditated terms

You have the opportunity to think about what you want and need in advance. You don’t have to be in that position where you need think on the fly about what you are delivering, what is included and what is excluded. This is important because your client is going to ask you those questions and they are also going to want the answers.

3.You and your business is protected

Another incredibly important part of your agreement is that you are protected against liability and held harmless. If something goes wrong you cannot be held liable for damages suffered by your client. Also part of this protection would be to safeguard your Intellectual Property.

4. Expectations are managed

You have the advantage that you can manage your client’s expectations of the service to be rendered or goods delivered.

5. Complaints management

Having a contract allows you to manage complaints because you can refer to the contract, the expectations, terms and then manage the complaint by referring to your contract, instead of referring to whatsapp messages or verbal agreements.

6. It looks professional

Having a contract gives you that extra edge because clients will respect you and your business more knowing that you are professional and have their interests at heart as well.

7. Protects your Client’s interest

Your interests are protected when you sign a contract with your client, but similarly your client’s interests will also be protected if you do not adhere to the agreement.

 

CONS

1.Costs money

This is one of the problems with getting your legal stuff sorted – it unfortunately is going to cost you money. But as the saying goes Penny wise and Pound foolish. This is exactly what you need to consider, yes it is a con that it costs extra money but in the long run you might have saved those pennies lost pound because you weren’t properly protected. Fortunately, The Legal Stuff has made contracts more affordable to limit this con.

 

2. Takes time

Yes, it is going to take some time to invest in setting up your contract, but after this initial set up of tailoring your contract you will have a reusable contract.

 

3. A bit of extra admin

It is going to be extra admin every time you deal with your client. The contract would first needs to be sent to them and then you need to make sure that they sign it before you can start. Fortunately this admin is limited by with electronic signing.

 

From the above pros and cons you can see that the pros definitely outweighs the cons. It is in your best interest to have a contract that gives you the extra edge in any business relationship.

 

Read more about Why Small Businesses should have contracts.