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The True Importance of Written Contracts in Business
Khalid Khan
December 21
What is a Written Contract?

A written contract is legally binding between two parties, wherein, both the parties agree to mutual terms and agreements stated in the contract. In case, either party breaks the contract, the other party reserves the right to use the same contract as a reference to highlight or prove in court as to what was agreed between them in the past.

Importance of Contracts in the Kingdom of Bahrain and Worldwide:

We often observe that everyday companies agree with other companies or suppliers related to the purchase of materials or certain services to be performed. For companies in Bahrain and around the world, the importance of the agreements or contracts is to identify what services to be performed by the second party, the time duration for the services, how payment will be processed to the second party, what could be the liquidated damages associated in case of delay of any work and others.

Business consultants in Bahrain always emphasize the importance of written contracts instead of oral contracts, as it helps business professionals to avoid disputes and misunderstandings in the future. In some cases, companies enter into a verbal contract with others based on goodwill, but there are chances of misunderstandings in any situation and it becomes difficult to prove wrong in court.

Whether you are an entrepreneur or a business owner, it is essential to have a legal binding with other parties.

In this regard, you can refer to some of the points that reflect the true importance of written contracts in businesses.

Develop Clear Understanding of the Terms and Conditions:

A formal written agreement clearly outlines the terms and conditions before the execution of work between the two parties. Both the parties should read the mentioned terms and conditions carefully and after discussion, the work should be performed accordingly.

Protection of Rights of Both Parties:

For the success of a business operation, a written agreement not only serves to be beneficial for the employer but also for the employee. For instance, a written employment contract indicates the responsibilities of an employer towards his employee in terms of salaries, health benefits, and protection of the rights of employees. Similarly, the employee should also perform his duties as mentioned in the contract.

Non-Disclosure of Confidential Information:

The other benefit of a written agreement is that it legally binds the two parties, in which the information of each party should be kept confidential. Employers should make sure that the company's interests are safeguarded per laws and the rights of employees should also be protected. For an employer and employee relationship, a detailed agreement is to be signed to prevent the misuse of a company's internal information, restricted information, and client's confidential data.

Purpose of Detailed Specifications in a Contract:

It is very important to mention specific terms like time frame and payment terms in a contract by a client. For example, if the project duration is of 6 months, then the other party should keep in view the exact completion schedule or should communicate timely before signing to the client with a valid change in the duration of completion. In case the second party agrees to the project duration and the project is not completed in time then liquidated damage will be bearded by the second party as stated in the contract by the client.

For all these reasons, clients should keep in mind while writing a contract the payment terms to be mentioned appropriately. A proper payment should be listed including the advance payment before initiating a project, progressive payment, and the retention payment. Similarly, the second party should review the payments mentioned in the contract and can discuss them with the client before signing.

Conclusion:

We have mentioned above some of the highlights that are important for a written contract. First Party should be very careful while drafting a contract as it reflects the clear position of a company in the market. To initiate a good business relationship with a company, a contract signing should be done to avoid any future misconceptions and both parties will have documented evidence in hand.