The Importance of Written Agreements in Business

Many people overlook the importance of written agreements, particularly when entering into arrangements with people they trust.

However; if anything, it’s more important than ever to formally document any  agreements you make with people you’re close to, like friends or family members. A written agreement will help to protect your relationship and make sure that both of your interests are being safeguarded.

At Hibberts Solicitors, our contract law solicitors help businesses and individuals throughout Cheshire and Shropshire to draft clear and legally robust written agreements. In this article, we explain why written agreements are so important and the risks of relying on unwritten promises.

Are verbal agreements still legally binding in the UK?

Contracts do not have to be written down to be legally binding. Agreements can be made verbally, in writing or even implied by conduct.

But do verbal agreements hold up in court in the UK?

While they are technically enforceable, verbal agreements tend to be much harder to prove than written contracts. Without clear documentation, it’s more difficult for the court to determine and enforce the terms of the agreement.

What are the risks of verbal agreements?

Not having the terms of an agreement written down can create significant problems if relationships break down.

Without a written contract, you are more likely to experience:

• Misunderstandings about the terms of the agreement
• Disputes over roles and responsibilities
• Difficulty proving what was agreed
• Lack of legal protection

If the parties involved cannot agree on the terms or interpretation of the contract, the dispute may need to be resolved in court.

When is a written agreement necessary?

Written agreements are recommended for all service agreements, business partnership agreements or high-value purchases to help minimise risk.

Common scenarios where a written agreement is advised include:

• Business partnerships
• Business transactions
• High-value deals
• Joint ventures
• Shareholder agreements
• Family-run businesses
• Property ownership arrangements

Creating a written agreement ensures that everyone is clear about their rights and responsibilities and the consequences of breaching these obligations. A written agreement can also set out dispute resolution procedures, giving a clear pathway to resolving conflict, should it ever arise.

The case of Cobden vs Cobden

The importance of having a written agreement in place was highlighted recently by the case of Cobden vs Cobden (2024).

The case involved two brothers, Matthew and Daniel Cobden, who were operating a dairy farm business together as equal partners without a written agreement.

At the centre of the dispute was an unwritten agreement whereby one brother would eventually be bought out and exit the business. Relying on this assurance, the other brother invested heavily in expanding and modernising the farm, believing the business was his future.

However, when relations between the two brothers broke down, they could not agree on how the partnership should be dissolved. One brother wanted to sell it on the open market, while the other argued that this was unfair given the earlier informal promises that had been made.

At the conclusion of the case, the court ordered a compulsory buyout. It was agreed that the one brother’s long-term reliance on the informal promise granted him a legal interest in the business.

This case highlights how informal promises and unwritten agreements still carry legal weight and how important it is to have a written agreement in place, even in family-run businesses.

Why is a written agreement important?

Relying on an informal promise can easily lead to misunderstandings, disagreements and even legal contract disputes. Ensuring the terms of the agreement are formally documented from the very start will provide clarity, reduce risk and help to protect relationships from turning sour.

Depending on the purpose of the contract, the written agreement should set out the following:

• The scope of the agreement
• Each party’s expectations and obligations
• How decisions will be made
• Plans for if circumstances change
• How disputes will be resolved
• Any terms and conditions that apply

Putting the terms of the agreement in writing like this ensures that everyone involved is reading from the same page. If disputes arise, it provides proof of what has been agreed, helping to resolve disagreements quickly and amicably.

Contact Hibberts Solicitors for help creating a formal written agreement

If you’re entering into a high-value deal, transaction or partnership, contact Hibberts Solicitors for help in creating a clear, well-drafted written agreement that will protect your interests and help to prevent costly disputes. Contact our commercial and contract law solicitors by calling 01270 624225 or emailing enquiries@hibberts.com to discuss your requirements.