Do I need to have written agreements with my friends?

Do I need to have written agreements with my friends?

SHARE

I and a couple of your friends have an informal agreement whereby they supply me with goods and I pay them when you receive payment. Is it really necessary to have an agreement in writing?

Introduction:

A quick visit to the world wide web would confirm for you the absolute importance of having everything in writing in a business relationship. Many personal relationships such as marriage are underlined by written agreements.

So, if some of us would sign ante-nuptial agreements before entering into an apparently loving marriage, why would we not put a written agreement in place for our business dealings?

Putting a service level agreement in place:

You are friends, right? You are working together and mutually benefitting. What could go wrong?

Consider the following clauses to a service agreement and ask yourself what would happen in your case if there was no signed agreement in place to address these matters. Additionally, consider the legally binding nature of disclosing these points in writing:

Effective date – when did we start doing business together? Did a problem arise within our working relationship prior to or post this date?

 

Entrepreneur-Newsletters
Entrepreneur’s daily tips & insights delivered direct to your inbox.

Obligations – Who is responsible for what? Imagine there is a problem with the product/service delivery. Whose fault is that? If a loss is to be born, who will bear that loss? You? Your friend?

Payment terms – What happens if you don’t get paid and your friend presses you for payment. Can you blame your client for not paying you? How long do you have to settle the account?

Delivery – What happens if your friend does not deliver the product that you have promised to your client within the agreed time lines (even if the reasons are legitimate). Your client will claim from you.

Termination/duration of agreement – Things are not working out, but your friend is dependent on your business, can you simply stop working together. Do you need to give your friend notice? How much notice? What if they don’t agree with this?

Ownership right – Your client doesn’t pay you but has the goods. Do those goods belong to you or your friend?

Disputes – Goods have been paid for, but your client has an issue and returns them… who is liable? Your friend says it’s not his problem. Do you carry costs? Does your friend? Who now owns this item?

•  Legal framework – How does the Consumer Protection Act impact your agreement? What about the National Credit Act? Who would deal with disputes along these lines?

Simply put

Get your agreements in writing. All good business relationships should have defined boundaries – this will provide clarity and ensure that all parties are protected.

Sherri Jeacocks
Sherri Jeacocks is a business mentor at The Hope Factory in Port Elizabeth. Before joining The Hope Factory, Sherri worked at Standard Bank for 11 years where she worked her way up to provincial management through the sound support of her mentors. Now she has a chance to share her knowledge and experience with her own mentees. She holds a B. Com degree.