Startup Legal Mistakes part 2
I am back with and today we will continue with our small series of posts, where I write about the most common legal mistakes that (not only) start-ups make. This post will be a little bit less.
The aim of this post is to get you as a founder some basic overview of the area that can be a challenge while concluding contracts with basically anybody. Without further ado let’s dive right in!
Are E-mail and Oral contracts binding?
Oral agreements between two parties are legally binding. Contracts concluded via a simple e-mail are also valid and binding for the parties.
I hope that this is not a shock to you, but with the previous sentence I wanted to stress out the importance of written contracts.
If there is no problem and the contract is fulfilled to the liking of both parties then there probably will be no dispute between the parties.
As soon as a problem arises (one of the parties fails to deliver according to the contract or something happens regardless of the parties), then you will see the biggest advantage of a written contract - the absence of potential “He said, She said, We thought” scenarios.
We won’t tell you that you won’t need to go to court if you have a written contract, but the position from which you will fightback will be evidence supported and not based solely on a “He said, She said” evidence.
Therefore we strongly recommend to have all contracts in writing. Of course a simple food delivery doesn’t need to have a 10 page contract, but for crucial services or deliveries it is not only recommended, but highly advised.
Written contracts and their pitfalls
We have a written contract, but what now?
We presume you have checked the essentials – the aspects why are you concluding the contract (e.g. services, outsourcing, equipment, etc…), but what about ancillary arrangements?
Generally in every system there are some basic rules, that govern a legally binding contract in case something in the contract was not regulated by the parties to the contract.
However not every general clause will be interpreted in your favour.
Afterwards the party to the contract with the better fitted contract will be the winner of a potential court proceeding.
There are many aspects to contracts, that need to be made to measure not only in the startup business.
Who supplies the contract? In who’s favour is the contract written? Are there liabilities? Who has to provide warranty and for how long? Is there a SLA? Delivery times or any retention payments?
If you have any question, feel free to contact me and we can talk about some of the aforementioned.