The close knit nature of the local business community in the West Midlands means that around 16,000 small businesses are in danger of finding themselves in costly disputes due to a lack of written contracts, law firm Manby Steward Bowdler is warning.

A great deal of business is discussed informally and even at more formal meetings, minutes may not be taken, which can increase risk for the parties involved.

Indeed, a lot of business is done on a 'gentlemen's agreement' or 'word is my bond' basis.

Manby's assistant Elisabeth Glover said: "This is risky as business relationships can turn sour, and often accurate written records are not kept of agreements and discussions, so when there is a dispute it is your word against theirs."

This makes dispute resolution difficult and frequently the matter heads for court or has to be settled out of court because of high costs - a claim for under £15,000 progressing to a defended trial can give rise to legal costs similar to the value of the claim.

Ms Glover said: "The judge will consider all the evidence of the agreement that the parties can put before the court. Courts will not normally 're-write the contract' for the parties even if the meaning of the provisions of the disputed contract might conflict with commercial common sense.