Five Situations When You Should Use a Contract (and How to Write One)
If you think about it, society is quite fragile. Most of it is just agreements between complete strangers to do certain things in a certain way, and if enough people stop honoring those agreements, things will fall apart pretty quickly. Most of these agreements are unwritten and unspoken—like don’t play the bongos at 3 a.m. while your neighbors are sleeping—but many are enshrined in a written contract. And we should all use contracts more in our lives because they eliminate uncertainty.
A contract is simply a legally binding agreement between two or more parties that sets out the terms of the agreement. You don’t have to be a lawyer (or hire a lawyer ) to write one, and they can protect you and the other party in a variety of ways. Any time you enter into an agreement involving money or property, you should have at least a simple contract in order for everything to go smoothly, because if this does not happen, you will have to take someone to court (even small claims court ). , having a contract will significantly strengthen your position and increase the chances that things will go according to your scenario.
Contract Basics
First, you need to know a few basic things about writing a contract. You don’t need complex wording, formatting, or specific legal terms, but a contract must include a few basics to be considered legally binding:
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Consideration. There must be an exchange of value, such as when you pay someone to perform a service for you.
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Clear acceptance. What is being offered (such as fees and services) should be very clear, as should the other party’s agreement to the terms.
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Legality. A contract containing illegal terms cannot be enforced, so forget about the legal obligation of anyone to commit crimes on your behalf.
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Possibilities. Both parties to the contract must be competent, of legal age, and capable of understanding what they are agreeing to.
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Reciprocity. Everyone must agree that they are actually entering into a contract and agree to abide by its terms. In other words, you cannot trick someone into signing a contract.
Contracts don’t have to be long, but they do need to be clear—any confusing wording or imprecise terminology can come back to bite you. However, there are many free downloadable contract templates that you can use as is or modify to suit your needs. And if you have any doubts about your ability to write a contract, you can always pay a lawyer to either write one for you or review one you created yourself.
So, you can write a simple contract for almost anything. When should you do this ?
When does it make sense to use a contract?
Room neighbours
If you are hiring a roommate, especially if it is an informal arrangement at a property you own, you should consider preparing a contract that will outline how the arrangement will work. Anyone who’s ever had a roommate will tell you that sharing rent or a mortgage with them is just one battle. There are shared utility bills, you discover that your new roommate considers washing dishes a highly unnecessary task, and you wake up one day to find that your roommate has taken in a roommate to split half the rent. This applies to random people you lure to your home through advertising, as well as to friends, family, or even a partner , because defining financial responsibilities is much healthier than simmering resentment towards the people you love.
The contract can spell out all of this – how issues of money, housework and lifestyle will be resolved. Plus, a contract can help avoid awkward conversations because it will specify who will have the bigger bedroom, whether pets are allowed, and how you’ll handle it if your roommate has to move out before the agreement ends. The chances that you will have to legally enforce such an agreement are relatively slim (there are many better options for dealing with bad roommates), but if things do get worse and your roommate owes you a large amount of back rent or is causing other problems, what something in writing will be very useful.
Loans
It’s always awkward when a friend or relative asks for a loan. If you want to help someone with a personal loan, you should definitely create a loan agreement . Firstly, people sometimes have a very short memory when it comes to their persistent promises to repay the loan. On the other hand, money can distort our memory and perception of events, so a contract can make the terms of a loan very clear.
Again, this doesn’t have to be difficult. The loan agreement must specify who the borrower and lender are, the loan amount, accrued interest (if any), and repayment terms, including the deadline for full repayment of the loan. It is important to note that it must also include a provision regarding what will happen if the borrower fails to repay the debt. Do you have their baseball card collection? Do you charge a fine? Do you get a certain number of slaps on Thanksgiving Day? Putting it in writing will save you a lot of stress if things go wrong.
Borrowed things
If someone wants to borrow your expensive items – or you want to borrow someone else’s things – a contract is a must. Whether it’s your car , expensive power tools, or anything else, a contract protects your property by ensuring the borrower states that it is in undamaged condition when he takes possession of it, specifying how it will be used and for how long, and specifying what the borrower is responsible for any damages, fines or other problems resulting from his use of the property. The contract may also state that if they nail their arm to your thigh with your nailer, you are not responsible for their medical expenses, and if they let your car roll down a hill because they forgot to set the parking brake, they will have to do so . pay for repairs or replacement.
Pet sitting or house sitting
Having a pet is a huge comfort and a huge responsibility. When we have to leave our pets behind during a vacation or business trip, quite often we need someone to look after them, feed them and communicate with them. And if you don’t have pets, having someone look after your home or even live in it while you’re away can give you a sense of security. Of course, you can hire a professional home and pet sitting service to do this, but many people will simply ask a friend to check out their home and/or pets—or hire someone directly.
To ensure your home and your beloved animals are properly cared for, a contract can help set expectations for both parties. From how often the pet sitter will check on the animals to their specific responsibilities (do the animals need medications? Do you want music played during the day or windows open for them?) to payment terms, whether the pet sitter can host guests. or how emergencies will be handled (including vet bills incurred while you are away), a contract will eliminate any uncertainty about how your animals should be cared for.
Handyman Projects
Ah, the handyman and handyman are an important figure in running a household. Ideal for projects too small for a contractor but too complex for a homeowner without the necessary skills, handymen are often hired informally, and agreements are often negotiated over handshakes and cash. The problem, of course, is that the handyman is still at your home tinkering with the things you need, and things can go wrong. A handyman contract can define the scope of the work, ensure there is no confusion about how much you agreed to pay them, clarify who is responsible for purchasing materials, and make it clear that they are an independent contractor and you are not responsible for their work. insurance.
Anything else
If you’re entering into an agreement with someone and the details haven’t been worked out yet, but you want to flesh out the details a little, you can create a Memorandum of Understanding (MOU). This document is not a contract and is not necessarily legally binding. But it is useful if you are negotiating because it sets out what both parties understand about the deal and can be referred to when drafting the actual contract. That way, if someone tries to make this deal with Darth Vader by changing the terms, you’ll have something in writing to fall back on. For example, if someone is negotiating to buy a big-ticket item from you (such as a used car) but needs to secure financing, you can draw up a memorandum of understanding that outlines the price you agreed upon and defines the length of the agreement. I’ll wait before looking for other buyers.
A contract may seem like a hassle for small or friendly agreements, but drawing one up won’t take much time and can save you heartburn if those arrangements turn out to be shaky.