Contracts are the lifeblood of any business. A strong contract enables your business to run smoothly. A strong contract also ensures the protection of your valuable business interests. Here are some components of a solid business contract.
Get it in writing
Some business owners prefer handshake deals. They make things feel less “stuffy” and less formal. In some transactions, an oral agreement is just as enforceable as a written agreement. However, when a dispute comes down solely to two conflicting points of view, a clear resolution is all but impossible. Setting down your terms in writing can help clear up disputes much more quickly and help protect your business operations.
Terms and costs
It may seem like stating the obvious, but ambiguous contract terms are an enormous source of litigation. Spell out specifically what is expected of both parties. Set forth the terms and costs for each party who is doing business with one another.
Make it clear
Too many contracts are a word salad of legalese. There is nothing in business law that requires such formality. Keep it simple. A contract written at a middle school level leaves little room for interpretation and can help each party better understand their obligations.
Address the potential for delays
Many businesses are quickly becoming familiar with the concept of force majeure and unforeseen delays. Your contract should include what should happen if one party cannot perform its obligations under the contract. You may wish to account for the possibility of labor strikes, natural disasters, and pandemics in the language of your contract.
Litigating a contract dispute is always an option. However, litigation is not the only option. You may wish to include language where disputes should be resolved through arbitration or mediation. This can result in a faster, less expensive solution to contract disputes.
You should include the steps either party should take if they wish to terminate the contract. You should also include language regarding how to rectify a breach in terms. This can help preserve business relationships and avoid harsh punishments for honest errors.
Consider a legal review
You can either draw up your own contract or ask a legal professional to draft one for you. A proper legal review of the document can help you avoid unpleasant disputes down the line. It is always best practice to consult an experienced business attorney.