Contracts between Friends

Contracts Between Friends: The Importance of Putting It in Writing

It is common to have friends who are also business partners. In fact, many successful businesses started as a partnership between friends. However, agreements between friends can quickly turn sour if there is a disagreement or misunderstanding. That is why it is essential to have a contract or written agreement in place to protect both parties.

Here are some reasons why a written agreement is crucial if you are doing business with a friend:

1. Clarity

A written agreement ensures that both parties understand the terms and conditions of the partnership. It leaves no room for misunderstandings or misinterpretations of verbal agreements.

2. Protection

A written agreement protects both parties in case of a dispute. It clearly outlines what should happen if the partnership needs to be dissolved or if one party cannot meet their obligations. It also protects each party`s intellectual property rights, which can be a big issue if one partner has contributed significantly to the company`s design or branding.

3. Accountability

A written agreement holds both parties accountable for their obligations. It ensures that each partner is fulfilling their responsibilities, and there are consequences for not doing so. This can prevent one partner from taking advantage of the other.

4. Professionalism

A written agreement shows that you are taking the partnership seriously. It makes the partnership more professional and, in turn, more attractive to investors and lenders.

What should be included in a written agreement?

1. Roles and Responsibilities

The agreement should clearly outline each partner`s roles and responsibilities. It should specify who will be responsible for what aspects of the business, what resources each partner will contribute, such as time, money, skills, or contacts.

2. Ownership

The agreement should specify the percentage of ownership each partner has in the business. It should also clarify how profits and losses will be divided.

3. Duration

The agreement should include the duration of the partnership and if it will be automatically renewed or not.

4. Intellectual Property

The agreement should specify who owns the company`s intellectual property and how it can be used.

5. Dispute Resolution

The agreement should include a dispute resolution clause outlining how any disagreements will be resolved. It can specify mediation, arbitration, or litigation.


Doing business with friends can be fantastic, but it can also be stressful if there aren`t clear expectations and responsibilities. That is why a written agreement is essential when doing business with friends. It ensures clarity, protection, accountability, and professionalism. If you`re starting a business with a friend, don`t neglect the importance of a written agreement.