December 7

Rethink Your Relationship with Legal Agreements: The Basics of Agreements and Contracts

This is the first in an ongoing series covering the value legal agreements bring to your business beyond the surface. From boosting your bottom line and expanding your business, to hiring the most talented team and improving every relationship you enter into, this series offers a comprehensive look at how effective legal agreements can enhance just about every aspect of your operation.  

If you are like many small business owners, you may have had one or more of the following thoughts about using legal agreements in your business:

  • I don’t need a legal agreement when I’m working with people I know and trust.
  • Legal agreements are only needed for big deals or purchases.
  • Legal agreements aren’t worth the time and money.
  • Lawyers push you to use agreements because that’s how they make money.
  • The do-it-yourself legal agreements you find online work just as well as those created by a lawyer.
  • We just need to get to work—we don’t have time to worry about legal agreements.


If you’ve ever had any of these thoughts, it’s time for you to rethink your beliefs. By rethinking the way you view legal agreements and using them effectively, you can make more money, boost your company’s growth, and improve your relationship with everyone you work with—clients, partners, team members, vendors, and service providers. 

Using the right agreements and having an integrated agreement process shows you care—and not just about the deal at hand, but about the other party and your business as a whole. Having well-drafted, well-structured, and well-presented agreements demonstrates that you believe in yourself and the people you work with, and these documents can greatly strengthen your business and relationships at every level.

Legal agreements 101

In order to get the most out of your relationship with legal agreements, you must first learn how they work. Here we’ll discuss the basic facts you should know about legal agreements and how they can affect your business. Note, the terms “agreement” and “contract” mean the same thing and are thus used interchangeably.

What constitutes a valid legal agreement?

For a contract to be legally enforceable, four elements must exist: 1) an offer 2) acceptance 3) consideration (i.e., something of value was exchanged like cash, services, or goods) 4) the capacity on the part of both parties to enter into the agreement.

In some cases, a contract must be in writing to be enforceable, but most of the time, putting your agreement in writing is not actually necessary. When I first learned this concept, the fact that agreements didn’t always need to be in writing was kind of shocking to me.

For example, if I make an offer, you accept the offer, something of value changes hands, and both of us have capacity (i.e., a sound mind), then a contract exists, even if it wasn’t written down.

While this all sounds pretty simple, problems can arise when what I offered to do turns out to be different from what you thought I offered to do. And even though we exchanged something of value and both have the best intentions, if you don’t accept that I’ve fulfilled what I promised I would do, but I feel like I’ve done exactly what I promised to do, we’ve got a problem.

In the above situation, a legal agreement actually does exist (all four factors are present), even though it wasn’t written down. Or let’s say the agreement was written down, but it wasn’t written clearly, a contract would still exist, although it would be a messy one that could potentially cost both of us big money to fix.

When must an agreement be in writing?

While an agreement doesn’t always have to be in writing to be considered valid, there are five situations in which a contract must be in writing to be enforceable. These situations include:

  1. contracts involving real property
  2. contracts that cannot be performed in under one year
  3. contracts where you assume someone’s debt or they assume your debt
  4. agreements related to the distribution of assets at the end of a marriage, such as a prenuptial agreement
  5. contracts for the sale of goods valued at $500.00 or more

What can go wrong with agreements that aren't put in writing?

Even if you are involved with a situation where an agreement doesn’t need to be in writing to be enforceable, putting every contract you enter into in writing is your best course of action for a number of reasons. 

First, if you don’t write down the terms of your agreement and you have to go to court, the court will determine the terms of your agreement based on assumptions about the behavior of the parties involved, the situation, and a number of other contributing factors. Plus, who wants to go to court just to enforce an agreement?

Second, laying out the specific terms of your agreement is going to close more deals for you, and it’s going to get you more out of your relationships in regards to the positive outcomes you desire. And that’s true not just for you, but for everyone you have a relationship with.

Third, the process of writing down the agreement, if done well, will shed light on areas of the relationship that you and the other party may have thought you were in agreement about, but you actually weren’t. And the sooner you discover where potential disagreements or conflict exist in a relationship, the better.

Although it may seem counterintuitive, trust me on this one: You want to identify any potential conflicts in the relationship as early as possible before investing time, energy, attention, and money that can’t be recovered. What’s more, by uncovering any potential sticking points ahead of time, you’ll find out how easily you can work through conflicts with the other party, which is a key part of any good relationship, especially those that last over time.

An instrumental instrument

When it comes to running a business, your legal agreements are among your most vital tools. Indeed, agreements are designed to govern and protect some of your company’s most essential elements: your personal liability, intellectual property, financial investments, and tax strategies, to name just a few.

Are you really going to trust a handshake deal or a generic, fill-in-the blank form you found online to control such vital components of your business?

With the right legal team supporting you, your contracts will not only be legally sound, but their clear, concise presentation will wow potential clients and make you stand out from the competition.


This article is a service of Davidek Law Firm, PLLC. We don’t just draft documents; we ensure that families and business owners make informed and empowered decisions about life and death, for themselves and the people they love.


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