00:11
Adam Stofsky
So, David, I want to ask you about what a contract actually is. You look in popular media, a contract is usually a piece of paper, right? It's written, it looks formal. Maybe there's some kind of seal on it. Everyone signs it. Does it have to be written down? Should it be written down? When does it not have to be written down?
00:30
David Tollen
So the answer is, in most cases it doesn't have to be written down. And in almost all cases it should be written down. And I don't say should because it won't be enforceable if it isn't. Most contracts can be enforceable. There's a couple of exceptions. Contracts about real estate, contracts that take more than a year to perform. It depends on the jurisdiction. But in most cases, you can shake hands on it. You can say, we agree, you can form a contract that way. I say it should be written down because if it isn't, it's going to do a bad job serving the real purpose of a contract. Or really two purposes. One is a contract should guide the two parties or more than two in their relationship. So writing it down means you have a guidebook. This is what we agreed on.
01:22
David Tollen
We can look back at it, you know, when we're doing whatever we promise to do and see how and what we promised. So if you don't write it down, you're going to be dealing with people's memories and possibly disagreements. In fact, the process of writing it down and negotiating the writing tends to bring out disagreements you haven't noticed. So it's really valuable. And then the other failure is if it's not written down. Of course, it gets very hard to enforce if you do get into a battle and somebody has to go to court to enforce it or to get damages for breach. It's, you know, it's confusing and probably contradictory testimony about what was agreed unless you have it written down. So it's very valuable to do so, but not always. Not usually required.
02:07
Adam Stofsky
So for business owners out there, the bottom line is you should just write down most of your contracts.
02:16
David Tollen
That's right, you really should, including with employees, with suppliers. Wherever you can get a written contract, it's valuable. And to be fair, there's settings where it isn't practical. There's, you know, agreements reached that really should be a contract, but they're just reached fast and performed fast. It's not always possible. But where possible, you should.
