Businesses often complete transactions via verbal agreements or simple purchase orders. Such arrangements are fast, efficient and straightforward. However, companies may unknowingly put themselves in a disadvantaged position by conducting major or recurring transactions without a specific contract in place.
Transactional contracts formalize the relationship between two companies, which can benefit both parties. Whether you are the company securing retail goods, production materials or services from another business, or the company supplying something that another business needs, creating an appropriate transactional contract can be beneficial.
Transactional contracts make expectations clear
Inadequate communication, unvoiced expectations and unmet needs are among the leading causes of contract transaction disputes in the business world. Making assumptions when going into a business arrangement with another company can leave you in an unfavorable situation.
Your transactional contract can do everything from defining certain terms to setting specific dates for delivery and payment. Being explicit about what you need or intend to provide and committing those terms to writing will help ensure that you and the other party have the same expectations for your transaction.
Transactional contracts can offer dispute resolution guidance
In addition to detailing your expectations about quantity, turnaround time and other factors for the relationship between your company and another, your transactional contract can outline steps to take if there’s a dispute between you and the other party.
From a grace period that allows a party in default an opportunity to correct an oversight or mistake to a requirement to enter arbitration if you can’t resolve things amicably within a certain amount of time, it is possible for your contract to make it easier for you to solve issues when they arise.
Transactional contracts protect you if you have to go to court
Ideally, you would be able to resolve any transactional dispute with another company quickly and directly based on the contents of your contract. Unfortunately, sometimes, the only solution is to have a judge rule on the transaction and alleged violation of the contract.
Having everything in writing will make it easier for you to protect yourself from spurious claims by another company or to bring claims against the company that does not fulfill their obligation to you.