The Most Common Reason for Contractual Disputes

Some of the worst business disputes I have had to work on ironically involved people who, until that dispute arose, were very close to each other. Those were either close relatives or best friends who did business with each other, such as engaging in a partnership or another form of business venture, who did not feel comfortable asking each other to sign any agreements, and who were proud to agree on everything orally, believing that they will be able to work out any disagreement about their business in the future. 

The above approach to business often backfires and hurts all parties as oral agreements inherently have serious flaws that are bound to give rise to conflicts, fights, disagreements and lawsuits that could have been avoided if a proper written contract was drafted. Most people who enter into an agreement do not plan to deceive, defraud or steal from each other. The most common reason for business disputes is the fact that people simply did not outline and did not agree or reached a mutual understanding on many of the key aspects of their deal. Even the most simple agreement for consulting services is not as simple as it might look at first. For instance, John hired his best friend Brad to perform software consulting services. They agree on the start date and on compensation orally and believe that there is no need to sign any written agreements. Brad quits his job for the better and a higher-paying consulting position. Subsequently, several unexpected events might take place - John might change his mind a few weeks later and decide to not use Brad's services any longer; or Brad's services might prove to be unsatisfactory, or both simply feel that although they get along very well in social situations, they are not working together very well at all.  In this situation, the parties are left without any agreement on how they should go about terminating their relationship. Investing a few hundred dollars in drafting a proper consulting services agreement would have been well worth the effort and the expense.

At a minimum, a consulting services contract would provide for termination terms, any applicable penalties that each party might bear, and basic dispute resolution terms, among other important terms that clarify any possible misunderstanding that may arise between the parties and eliminate many ambiguity that are typical in business agreements.