Home BUSINESS The Importance of a Formal Agreement in Business

The Importance of a Formal Agreement in Business

To help prevent misunderstandings on business dealings, consider the way Abraham bought a piece of land. He “weighed out to Ephron the amount of silver that he had spoken in the hearing of the sons of Heth, four hundred silver shekels current with the merchants. Thus the field of Ephron that was in Machpelah …..became confirmed to Abraham as his purchased property before the eyes of the sons of Heth among all those entering the gate of his city.” This was no private gentleman’s agreement. It was a formal agreement, confirmed in front of witnesses. There was no misunderstanding about what had  been purchased and the exact price. – ( Genesis 23: 2-4, 14-18 ).

Similarly, it is wise for everyone to formalise important transactions. If the transaction involves the sale of an item, the parties may write down what is sold, the price, the method of payment, when and how delivery is to be made, and other conditions agree upon. If it involves a service that is to be performed, the parties may write down the work to be done, when it is to be completed, the price, and other factors. This document should be dated and signed, and a copy should be kept by both parties. Such a written agreement is especially vital in a business partnership. It helps both sides to understand their relationship clearly and assists them to live in harmony with this principle: ” Let your word Yes mean Yes, Your No, No.” In more complicated matters, it may be advisable to seek professional help drawing up a written agreement.

In formulating written agreements, the parties should give thought not only to objectives but also to possible consequences, such as how to terminate the arrangements in the event that this becomes necessary. All business ventures hold an element of risk, and no document can incorporate every circumstance that may arise. If circumstances do change, the agreement may have to be amended or renegotiated. In time it may even become apparent to a person that he has undertake a business commitment unwisely and he may have to extricate himself in an honourable way . However, this should not be merely a device to escape responsibility for debts incurred by personal extravagance or mismanagement. The matter needs to be discussed to see if the the agreement can be dissolved and what financial settlement, if any, needs to be made. Surely, though, a conscientious person will do all he reasonably can to honour contractual obligations, even if he must change his life-style for a time. It is important to fulfill your obligations in an agreement even though such is not in your best interests. Let your affairs take place in love.

Such agreement brings peace and rest of mind for both parties, including security. It Further protect both parties in case of any legal action in the future

In view of this, before entering a business relationship, it is good to count the cost. Some may optimistically sail into the seas of commerce but founder on its hidden rocks. For example, some have felt that the profits earned by their employers could have been theirs if they had had a similar business of their own. But they failed to realise that business management is not easy in this world of cutthroat competition. Each year tens of thousands of businesses fail all over the world. Thus, after experiencing bitter disappointments in commercial ventures, many peoples have been relieved to become again employees with a steady salary


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