4 Tips for Creating Solid Business Contracts
When it comes to contracts, most people are aware that it’s vital to have as many details as possible down in writing. These contracts can be a key aspect in determining the success of failure of your business, as they are what protects your investments. However, many business owners have very little experience in creating business contracts, which can leave them wide open for costly mistakes.
Keeping It Simple
While many people assume a contract has to have plenty of legal language that may be difficult to understand, the fact is most experts who provide legal contract advice state that language in contracts should be kept as simple as possible. It is possible to cover all the areas you need to without confusing your reader. In fact, the more convoluted your language, the more likely you are to miss something important and leave yourself wide open. Short, clear sentences, along with simple and numbered paragraphs, all add up to a document that everyone can easily understand.
Correctly Identify All Parties
To make sure it’s clear which obligations are to be performed by each party, the contract should correctly identify all parties by their correct legal names. If this is not done, major disputes can arise, which many times ultimately require a court to fix. If parties are not correctly identified, it could also invalidate a contract, meaning that it cannot be upheld. To keep this from happening, identify a business as an LLC or corporation, not simply by the names of the owners. It may be useful to consult with a lawyer to prevent misnaming any of the parties that the contract applies to.
Include All Details
In many contracts, people make the mistake of taking for granted that certain duties or details are so clear that they don’t need to be included in the contract. This is incredibly unwise, as things that are not written down are not enforceable by law. It can be tempting to use a boilerplate contract that you found online, but these contracts are not ideal. Make sure that you get a contract drafted that is specific to your business and the situations you are dealing with. If a problem arises and results in a lawsuit, judges will interpret the contract strictly based on what is written down, not what was agreed upon verbally or with a handshake.
Don’t Forget Termination Clauses
Since it’s inevitable that from time to time business parties decide to terminate a contract, make sure you include the provisions for doing so in any contracts. Whether it’s failing to make payments on time or refusing to perform certain duties, having provisions for termination can save everyone from having lots of unexpected legal headaches.
It may seem daunting to create legal contracts, but it is something that is within your skill set. It may be helpful to retain a business lawyer to advise you. Let them guide you through the process of drafting contracts that will strengthen your business and your profits.