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Yes and no, it depends on how you define contracts.  Most people tend to think if a contract as a written document that both parties sign.  That is indeed a contract.  However, a contract as defined by the law includes any agreement or promise to do something, with some exceptions.  Thus, a court will enforce an oral promise, as long as you can prove the promise was made. Proving a contract existed is not always easy, especially if someone is bent on lying in court.  That is why it is always prudent to have things in writing.  A multi-email exchange between two parties negotiating a deal can be a promise; just as enforceable as a 10-page contract.  Contracts can also be implied based on the conduct of the parties, industry standards, etc.  Thus, to answer the question, you do need a legal contract to get anything done.  However, you don't need to have what most people think of as a contract, namely a formal, written document. 

That said, it is very wise to have a formal written document when the circumstances justify the expenditure on legal fees.  Lawyers frequently joke among themselves that they don't mind if clients hire them up front to draft the contract or not, because they know they'll get them for a lot more money when the parties end up in court.  This often-quoted, mercenary statement might be funny, if it wasn't for the repulsively greedy spirit in which it is commonly joked about by lawyers.  Yet, like it or not, the statement is actually quite true.  Contracts are like insurance policies; you get as much insurance as you can afford, and you hope you never need it. But, when you under-insure yourself, you leave open the door for nightmares to happen.

Contracts are not only enforcement tools, but they are also one of the best liability-shielding tools you can buy for the money.  That's because going through the process of writing a contract often identifies weak spots in a business relationship that can be addressed up front, before the investments in time, money and ego are plentiful.  Also, contracts can deter lawsuits from happening, shift liability, and help you control outcomes when there is as dispute, rather than waiting a year or two for a judge to decide.

Sometimes yes, and sometimes no.  It goes without saying that a form is going to be a lot cheaper than having an attorney custom draft a contract for you.  Keep in mind, most attorneys now use forms themselves, whenever one is available.  Legal drafting has become more a practice of cut, copy, and pasting than creative writing.  This is a good development because it can keep legal fess down. 

However, that is not to say that you as a non-legally educated person can do the same thing by copying desired portions from various sample contracts.  Attorneys have a lot more templates to draw from than any software or internet site available to non-attorneys.  What's more, most of the free forms on the internet are not well-drafted contracts to begin with.  All too frequently, the free contracts on the internet have been modified by non-attorneys who don't know what mistakes they're making when drafting.  90% of drafting contracts is not rocket-science, and anybody can do it if they are reasonably analytical and literate.  However, it's the crucial 10% that can cause nightmares for those drafting contracts without a legal education.  An attorney knows when language in a particular form needs to be modified to accommodate the specific needs of your particular situation.    And, only attorney services come with malpractice insurance.  You don't get that from a form.

That said, if there really is no money, then it's often better to have something in writing rather than nothing at all.  Even if no form is available, you might try at least jotting down the basic terms of the deal.  In order to be enforceable, there has to be sufficient detail - especially when it comes to payment terms.

The future will bring us well beyond passive forms that must be manipulated by a person who understands the law.  We will have interactive worksheets that will allow clients to specify their choices, and have a contract automatically drafted and delivered to their email box.  However, we're not their yet.  Until then, it's safe to say that hiring an attorney to assist with contracts is money well spent in virtually every case. 

More about analyzing contracts...

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