I am continually amazed how many people enter into oral agreements that can have a substantial impact on their financial well being.  I have seen companies ship hundreds of thousands of dollars in goods without a contract or clear terms on payment.  I have seen individuals invest hundreds of thousands of dollars without anything in writing about how the money will be used or whether it is a loan or an investment.  (If the business goes south, the owner will decide it is an investment.  If it is successful, it will be a loan). 

In our excitement to move forward on a deal, we often forget to think rationally about how we will prove our position if the deal goes sideways.  Whether it is hiring a builder to construct a house or entering into a distribution agreement, there is hardly ever a situation in which it is not advantageous (to an honest person) to have something in writing.

There is an old saying that an oral agreement is not worth the paper it is written on.  While this is not true legally, proving the terms of the agreement is much, much harder if it is oral.  When were the goods to be delivered?, how many?, who is paying shipping?, when is payment due?, etc.  If the person you are dealing with is not honest, even a written agreement may be insufficient to protect you from harm, but it will minimize the damage.  However, even honest people can have a dispute as to what the terms were.  It may be due to poor memory or simply that each sides understood the conversation differently.

Be concerned if the other party wants to do everything over the phone, or is taking a long time to get a contract back.  Is their some reason they do not want things in writing?   While having a written agreement, signed by both parties, is prefered.  At a bare minimum the terms should be memorialized in a letter or email. 

"Thanks for the call.  Pursuant to your request we will deliver the fifty boxes next Friday and will need payment  of the $25,000 by the end of the month."   Such a confirmation will either confirm the agreement, or will alert the other side to the misunderstanding.  You may get back.  "No, we need 25 of the boxes this Friday and we need 45 days to pay."  A simple note prevents both parties from feeling like the other party has broken the agreement.  If the modified terms are not agreeable, it is better to find out before you shipped $25,000 in product.  If the party is trying to pull a fast one, the written communication with help preserve the agreement at the time it was made.  An email the day the agreement was made will be much more convincing than the recollection of either party six months later.

If the agreement is for something more substantial, it is also advisable to have a written agreement prepared or at least reviewed by an attorney.  Skipping the attorney may save some money in the short run, only to cost much more in the long run.  I have seen many situations in which a couple hundred dollars of attorney's time would have saved $30-40,000 in legal fees when the deal went bad.

If a deal is worth doing, it is worth writing down.  This also applies to family and friends.  If the agreement is written out, there is little room for misunderstanding or selective reinterpretation when one party is required to act.  Rather than showing that you do not trust your family or friend, a written agreement will make it more likely that you will still be friends in the future.  The loan you make to your brother-in-law will not magically become a gift, and the family will be less likely to stop speaking to each other if the terms of the business deal are clearly written out in the begining.

Yes, it can be a pain - but much less painful than trying to enforce an oral agreement.