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  • Writer's picturehayleytowers11

Business disputes when there is no contract



Let’s think about what can happen when you have a business arrangement with someone else but you don’t have a written agreement or contract about that arrangement.


It might be a contract for you to provide services, or it might be a contract to do something together in a joint venture like a partnership.


As a bit of a fun example, imagine you are a person involved in a band. I use this example as it seems like such a casual arrangement to begin with and yet, without an agreement it can go so wrong.


Let's say you start a band with another person. You record some funky albums together and enjoy a great reputation playing at weddings and parties - what a great side hustle. But after several years you fall out with each other personally and it reaches the point where you can’t resolve your issues, so you agree to go your separate ways.


However, you find you can’t easily come to an agreement about who gets what, including how the money in the bank account is split, whether your equipment is sold, your copyright and intellectual property and even ongoing digital sales of your albums.


In this situation you now have a dispute on your hands. Disputes often need assistance to resolve, as we humans are emotional and often cannot see past our personal issues.


This is the part where you hire a lawyer and pay them thousands of dollars to help resolve your dispute. The reason it is expensive is that it is hard at this stage to put the pieces back together, especially without an agreement in place for your arrangement - it means every single thing has to be worked out now, while the parties are angry and upset.


It is not just expensive for you, it is highly stressful and time consuming.


You know what I am going to say..


This is one of the most important reasons to get your contracts done at the start of your business arrangement. You can always add to it or vary it, but by having a well drafted contract in place you should, at the least, have an agreement about:


  • the scope of your business arrangement (who does what, when it ends, how each of you can end it, what happens when one party wants to leave and how they leave);

  • the responsibilities of each person in the business arrangement, i.e. your ongoing obligations to each other;

  • payment, refunds, cancellations and other charges and what factors impact on this or can change this; and

  • ownership, rights and usage of intellectual property and physical property.


The contract forms the blue print for your business arrangement and can be referred back to at any time, including at the first sniff of a dispute. A good contract does not mean that there won't still be a dispute - disagreements are part and parcel of life - but it helps immensely to guide the resolution of that dispute.


If you think you need a business contract, check out our Free Business Legal Documents guide - you will find it under the Blog tab on our website.

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