5 Reasons Why You Need A Contract for A Business Transaction In Malaysia
Contracts are fundamental to any business or commercial transactions. You may regard them as boring and complex clusters of legalese, but different types of contracts are still frequently used in various business settings. Here are the reasons:
1. A contract can record your agreement
One of the top reasons that a business needs a contract, especially a written one, is that it can legally serve as an official record, or perhaps a proof on everything that the parties have agreed upon. More often than not, parties would enter into lengthy discussions and negotiations, and there are a lot of terms that are included to complete that deal. Rather than suffer through the confusion of each party’s responsibilities, you can simply refer to what is stated in the contract for guidance.
By documenting the mutual understanding that both parties have already reached beforehand, a contract can become a reliable visual representation of the business relationship, which is helpful for future references and can prevent possible disagreements on the finer details.
2. A contract can help you navigate the law
The law can sometimes be complex and overwhelming, but over time the law of contracts have been boiled down to a set of defined rules and principles. Businesses often seek assistance from legal professionals to draft contracts that are tailored to the circumstances of the particular transaction, which also allow the parties to have a better grasp on the relevant laws that apply to them in that context. This makes the law a little less scary and actually more comprehensible and accessible for those involved.
3. A contract can legally bind parties to their duties
Another key reason that businesses enter into contracts is due to the legal effect that a valid contract can bring to a business venture. If someone attempts to back out of an agreement, it can become extremely disruptive to that transaction, and the other party may have to face great loss. A contract will legally hold the parties to their agreement, imposing penalties or remedies for when parties default on the duties outlined in the contract, and protecting the rights of other party at the same time.
4. A contract can provide recourse when disputes arise
The point above is that when a contractual relationship breaks down, the parties could refer to the contract for options of recourse. A contract may be the result of an agreement, but it is quite common for conflicts to arise due to different reasons. Fortunately, a contract can also provide solutions to minimise and reduce these problems. The terms of a contract can be used as a reference and encourage the parties involved to cooperate as agreed beforehand, which can be a win-win situation.
However if one party fails to deliver on their promise, the contract should also contain readily available solutions for such situations, for instance mediation, rescinding the contract or even litigation. As a legally enforceable document, a valid contract can be brought up in a court of law, which can help parties safeguard their own rights and interests in any transaction.
5. A contract helps to build trust
A contract by its core is a reflection of the relationship of both parties, and parties would reasonably expect a sense of security from implementing a legal framework on a transaction. If a business creates proper contracts that takes into account the rights and interests of the other party as well, it shows that the business is sincere in committing to that relationship. The other party would very likely establish solid trust in that relationship and by extension in that business, as they can achieve peace of mind knowing that they are protected by that contract. This could elevate business branding, and potentially benefit the business in the long run.
Contracts are handy tools that build strong commercial relationships, and when contracts are well drafted, they may go so far as to display a business’ brand and values. Therefore, it is advisable that you seek help from legal professionals to prepare your contracts according to your needs and ensure that your rights and interests are protected.
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