The importance of putting your legal intentions in writing.
“Writing prevents and minimizes disputes. When parties to an agreement, or even a single party (as in the case of unilateral legal acts such as wills) have a well-drafted document recording their intentions that is signed by the party or parties entering into that agreement, and which is witnessed by an independent, competent adult, there is less chance that the terms will be disputed and, moreover, if a dispute does arise, you have a better chance of resolving that dispute early on than where you have no written agreement or a poorly drafted written agreement.”
- Extract of speech to Shoalhaven Heads Combined Probus Club, 13 February 2015.
The validity and enforceability of oral agreements or non-verbal agreements is implied by words and actions
Just because your legal intentions are not written down does not mean you have no recall to the law when your spoken intentions or agreements, or intentions and agreements brought about by actions, break down. Generally speaking, oral or implied agreements are as legally valid and enforceable as if they had been written down.
At Common Law (that is, judge-made law) there is no requirement to put any agreement in writing. It does not matter whether your agreement is written down, made orally or implied by actions. All of these methods of communicating your legal intentions are acceptable and enforceable.
The problem with implied and oral agreements, however, is that there is often uncertainty about whether there really was any contractual agreement at all, as well as uncertainty (where parties agree there was an agreement) as to the exact terms of the agreement for the contracting parties. This also has implications for any person or entity who later contracts with those contracting parties in respect to the object or rights over which there is this underlying legal uncertainty. In that situation, and where a dispute arises about exact terms, the uncertainty will require clarification by a court.
Example: Peter is a full time teacher but has a side business developing websites. Adam is his friend. Adam asks Peter to help him create a website for his handy-man business. Their discussion about it goes like this:
Adam: Mate, having some trouble getting my website going. Any chance you can help?
Peter: Yeah, mate. No worries. I can help you next week. You supply the beer!
Peter spends many more hours helping Adam with his website than he expected. Peter and Adam both work on the website. Once the website is running, Peter sends Adam a "mates-rates" bill for his assistance. Adam is really surprised. He thought Peter was helping him out of kindness and did not expect to be billed by Peter. When Adam asks Peter about it, Peter gets really angry and complains that he spent hours and hours helping Adam and he can't be expected to take time out of his side-business to help Adam for nothing.
The question is, was there a contract in the first place?
Assuming, Peter and Adam had agreed to Adam paying Peter for his assistance, what happens when the job becomes bigger than expected? What are the terms for payment in those circumstances? What if the job takes longer than expected and both Adam and Peter lose income because of this. If Peter and Adam had bothered to draw up even a simple agreement, they may have thought about these scenarios and developed their agreement to take additional hours into account and avoided ruining their friendship.
While court is without a doubt a very necessary institution, the fact is that it is rather inconvenient and slow institution in a fast-paced world - often an unacceptably slow. And, of course, there are the costs of time, money and emotional turmoil to consider.
Instances where legislation requires a document to be recorded in writing
Therefore, to obviate the problem of uncertainty, Parliament has stepped in and regulated certain transactions so that uncertainty over the intent of the transacting parties is reduced to the barest minimum. For example, all sales of land in Australia must be reduced to written form and, moreover, the contracts are more or less standardized. If a sale of land was agreed to (in Australia) without the written formalities being attended to, it does not mean that the sale could not take place, but it would mean that the transaction can't be registered with the relevant lands office and as such, a person's ownership or divestment of land would not be recognized anyone else in Australia (other than the transacting parties themselves). This presents a problem for the purchaser of land in particular, because the rights that passed with the land sale will forevermore be uncertain and therefore more likely to result in legal dispute at some point in future.
Another example of legislation stepping in and requiring written proof of the transaction relates to leasing of residential property in NSW: When leasing property, you should have a written contract in place, but your lease would not be invalid if you didn't have that agreement in writing. But if you intend on leasing the property for a period of longer than 3 years, no matter what term is provided for in the contract, you must have the lease registered or the lessee has no protection against a landlord who decides to end the agreement early. Only written agreements can be registered, therefore it stands to reason it is always better to enter into a written lease that can be referred back to when a dispute arises.
In the event of a dispute, written record of a transaction (a contract) will also allow a lawyer to assess more quickly whether you have a case that will be worth your while to take to court. Oral or implied contracts are often difficult and expensive to prove, making the risk-payoff not worthwhile for many wronged parties.
Putting your agreements and other legal intentions into a professionally written form will achieve the following:
It will spell out the expectations of each party. Then everyone knows what needs to be achieved.
It avoids misunderstanding and consequently may prevent or shorten any dispute. Most people don’t normally go out of their way to breach agreements. Parties will sometimes do so, however, when they have been treated badly or unfairly. Quite often that is not actually the case. What has in fact happened is that the expectations of both parties were not spelled out in detail at the beginning or were misunderstood.
It defines procedures, and in particular what procedures must be followed in the event of dispute. This prevents parties from simply suing each other, but usually encourages some dialogue once the dispute has arisen with the goal of avoiding legal intervention and wasting lots of money.
Has a psychological effect. A written contract makes parties more serious about their actions and obligations.