Although most people believe that it is always necessary to get any agreement in writing, there are cases where an oral agreement is legal and valid. However, since there are many cases where a written agreement is necessary or at least useful, it’s a good idea to know which situations require which types of agreements.

The general rule for deciding whether a contract should be in writing is determined by the nature of the contract. For example, any agreement that is related to your business, large personal assets like your home, and contract work that will take more than a year to complete must be written into a contract and made binding. However, an arrangement that involves a low amount of financial risk, whether between family members or not necessary as part of your daily business can be entered into verbally.

The downside to any verbal agreement, however, is the fact that they can be difficult to enforce. For example, if he lends his brother fifty dollars and he verbally agrees to pay him back in three weeks, but three weeks come and go without paying, it might be difficult to get the money back from him. Without a signed, written agreement, his brother could claim that he said he would pay her in four weeks, or worse, he could claim that the money was not a loan but a gift. In this type of situation, aside from stopping all communication with your brother, there really is no legal action you can take. She could try to sue his brother, but the lawsuit could end up costing her more than the original fifty dollars, or she could win the lawsuit and have the judgment thrown out because he can’t pay her.

Another drawback of a verbal agreement is that they often do not cover all the details necessary for a contract. For example, you can make and agree to sell wood carvings from your home part-time to a friend. Without a written agreement, you may end up facing problems in the future. For example, it may decide that the items are not selling and refuse to pay you for items that you have already made. On the other hand, you may verbally agree on a price and then find out after delivery that your friend expects to pay a lower amount. In either case, having a written contract detailing every conceivable option for the deal will protect the rights and interests of both parties.

Just as some agreements do not require a written contract, some agreements must be in writing to be legally binding and to protect you and your property from harm. These types of agreements generally involve the sale of real estate or other expensive material possessions, the loan of substantial amounts of money, and any agreement that outlines the provision of services.

While most contracts can usually be drafted by individuals, it is generally best to hire a lawyer to draft any contracts related to your business or involving large amounts of money or contracted services. While you may want to write the contract yourself to avoid legal costs, paying a lawyer now could save you hundreds of dollars later. If another party writes the contract, it is best to hire a lawyer to review the contract before you sign it. When looking for a lawyer, it is recommended that you contact one who has experience in commercial contracts or who specializes in commercial legal matters.