The most expensive documents you never signed

Many businesses start on a handshake between friends or family, with everyone assuming the relationship is strong enough that formalities can wait. Without a partnership or shareholders’ agreement in place from the outset, there is no record of how profits, losses, and decision-making authority should be shared, what happens if a partner wants to exit, or how a deadlock should be resolved.

When the business grows, or when it starts to struggle, disagreements about contribution and entitlement can escalate quickly. Without a written agreement, resolving these disputes often falls back on default legal principles that may not reflect what any of the parties intended, and litigation becomes the only way to establish the terms that should have been on paper from day one.

Depending on the circumstances, disputes may ultimately be determined by common-law partnership principles or the provisions of the Companies Act 71 of 2008, rather than what the parties believed they had agreed. A properly drafted acknowledgement of debt also assists in determining when a debt becomes due and may have implications under the Prescription Act 68 of 1969 if repayment is delayed for an extended period.

Depending on the nature of the work, the Consumer Protection Act 68 of 2008 may provide important protections, but those rights are far easier to enforce where the parties have clearly recorded their agreement in writing. Unlike spouses married in terms of the Matrimonial Property Act 88 of 1984, unmarried partners do not automatically acquire proprietary rights merely because they are in a long-term relationship.

Although every company must have a Memorandum of Incorporation (MOI) in terms of the Companies Act 71 of 2008, a shareholders’ agreement deals with many practical commercial issues that the MOI often does not address.

Lending money to a relative rarely feels like something that needs paperwork. It can feel awkward, even insulting, to ask a sibling or parent to sign a loan agreement. Yet family loans are among the most common sources of long-running disputes, precisely because there is nothing in writing to confirm whether the money was a loan, a gift, or an advance on an inheritance.

Without a signed acknowledgement of debt or loan agreement setting out the amount, repayment terms, and any interest payable, recovering the money — or defending against a claim that it was never meant to be repaid — can become very difficult. These disputes can also complicate deceased estates, where an undocumented loan to one child may be disputed by the others.

Whether it is a renovation, a home extension, or a smaller once-off job, it is common for work to begin on the strength of a verbal quote and a good relationship with the contractor. Without a written contract recording the scope of work, price, timelines, and standard of workmanship expected, both parties are exposed.

If the work is defective, delayed, or more expensive than expected, there is no agreed benchmark to measure the dispute against. Homeowners may struggle to prove what was promised, and contractors may struggle to prove what was agreed to be paid. A signed contract, even a simple one, gives both sides a clear reference point and can prevent a dispute from ending up in court.

Buying a home together is often one of the biggest financial commitments a couple will make, yet unmarried couples frequently do so without any agreement regulating their respective contributions, ownership shares, or what happens if the relationship ends.

Unlike married couples, unmarried couples are not automatically protected by matrimonial property law. If the relationship breaks down, ownership will generally be determined by what is recorded in the title deed, regardless of who paid more towards the deposit, bond instalments, or renovations. A cohabitation or co-ownership agreement, signed before or shortly after purchase, can set out each party’s financial contribution and what should happen to the property if the couple separates.

Even where a company has been properly registered, many shareholders never sign a shareholders’ agreement. The Memorandum of Incorporation deals with the company’s internal governance, but it will not necessarily address matters such as pre-emptive rights on the sale of shares, restraint of trade, deadlock-breaking mechanisms, or what happens on the death, retirement, or removal of a shareholder.

Without these terms recorded and signed, shareholders can find themselves without a clear exit route, unable to agree on the value of shares being sold, or in dispute over control of the company at exactly the moment when clarity matters most. A properly drafted shareholders’ agreement is one of the most cost-effective documents a company can put in place, precisely because of how expensive its absence can be.