Verbal Agreement of Payment: What It Is and Why It`s Important
As a freelancer or a small business owner, you may have encountered clients who prefer a verbal agreement of payment rather than a written one. While it may seem convenient at first, it`s crucial to understand the risks and drawbacks of relying solely on verbal agreements.
What is a verbal agreement of payment?
A verbal agreement of payment is an informal agreement between two parties regarding the terms and conditions of payment. Instead of drafting a written contract, both parties agree to the payment terms through a conversation or an email exchange.
Why do clients prefer verbal agreements?
Clients may prefer verbal agreements to avoid the hassle and cost of drafting a written contract. It may also give them the flexibility to change the payment terms without having to worry about making changes to a written document.
Why is it important to have a written contract?
While verbal agreements may seem convenient, they lack the legal validity and enforceability of a written contract. A written contract can provide a clear understanding of the payment terms and conditions, including the scope of the work, payment schedule, and penalties for late payments or breach of contract.
Having a written contract also protects both parties from misunderstandings and miscommunications that may arise during the payment process. If a client fails to pay or disputes the payment terms, a written contract can serve as evidence of the agreement and help resolve the issue.
How to create a written contract
Creating a written contract doesn`t have to be complicated. Here are some tips to help you create a contract that protects both parties:
1. Identify the parties involved: Clearly identify the client and the service provider.
2. Scope of work: Define the scope of work, including the deliverables, deadlines, and any additional services that may be required.
3. Payment terms: Specify the payment schedule, the amount, and the method of payment. Also, include any penalties for late payments or breaches of contract.
4. Confidentiality: If applicable, include clauses relating to confidentiality and non-disclosure of confidential information.
5. Termination: In the event of termination, specify the terms and conditions of termination, including any compensation owed to the service provider.
6. Governing law: Include a clause specifying the governing law in case of disputes and the jurisdiction for any legal proceedings.
Conclusion
In summary, while verbal agreements of payment may seem convenient, they lack the legal validity and enforceability of a written contract. As a freelancer or small business owner, it`s crucial to protect yourself and your clients by having a written contract that clearly outlines the payment terms and conditions. By doing so, you can avoid misunderstandings and ensure a smooth payment process that benefits both parties.