Being an attorney has its advantages when it comes to drafting and interpreting contracts for clients and our ventures. We want to share our top 10 contract tips that will be helpful to entrepreneurs and business owners.
The consequences of making certain mistakes can costs thousands of dollars, lots of headaches, or even worse, could cause a business to fail.
These tips are here, so you don’t end up in any of those situations. Enjoy
1. Make sure the contract is in writing
- this is the most significant contract tip!
- If the other party to the contract is a family member or close friend, there is even more of a need to have everything in writing.
- There is a lot of emotion involved in this situation; judgment can cloud what is best for the business agreement & everything needs to be expressed among the family members or friends.
- This step will help you avoid saying in the future, “if only we put that in writing.”
- This tip if for the benefit of both parties because you will have agreed formally to the terms and thus can know what to expect out of the relationship.
2. Make sure the contract is fair (for both parties)
- You need to change your perspective of what a contract is and why it is created.
- The goal of any contract is to outline the mutually beneficial relationship, which results in a fair agreement for both parties.
- By shifting the focal point of how you view the contract to a fair and balanced agreement, you will create a much healthier business relationship.
- This balanced approach focuses on, not only what is best for you, but also what is best for the relationship between the parties in the long r
- Not only by doing this will you show others the type of person you are, encouraging them to do business with you, but this will also allow the benefit of the bargain to prosper greater.
- If one person feels that they got taken advantage of in the contract, their obligations usually will lack or their attitude towards the agreement will reveal it; You want to avoid this.
3. Keep it simple
- Keep the contract and contract language as simple as possible.
- If a term can be simplified, do it.
- During some agreements there are technical and industry-recognized words.
- You should define these terms (especially if there are different interpretations) in the agreement at the very beginning.
4. Identify each party correctly
- Pay attention to who you are dealing with and for what purpose.
- If the other party is a business, make sure you look them up in a government database to see what the name is registered under.
- Verify that the person signing the document works for and has the legal capacity to enter into the agreement.
5. Write out specific intentions and terms of the contract
- There are essential terms of a contract, which are the foundation of a legally binding contract. Here is a good source for what makes a contract legally binding.
- Make sure that the payment obligations are incorporated.
- This includes who has the duty of paying, how the payee will be paid, when they will be paid, and in what form.
- Include a termination clause in the contract.
- This should state what happens if either party breaches the agreement. Additionally, the contract should expresses when it will end and how it will end.
- There should be a dispute resolution clause outlining how a dispute under the contract will be handled.
- Including a choice of forums clause is necessary as well.
- This will determine in the future which state laws govern the dispute.
- If there is sensitive information in the contract, a confidentiality agreement should be included.
- Similarly, Non-disclosure clauses help to ensure that the other party will not and cannot disclose information in the contract with other parties.
6. Anything else agreed upon needs to be incorporated into the written contract
- Leave nothing to dispute; if something is said during the negotiations put it in writing.
- Expect the contract to be the only thing you have to prove your agreement exists.
- Avoid any oral promises! Get them in writing.
- Make sure the language in the contract is consistent through the entire document.
- If any other contracts are entered into at a later time, make sure those are in line with the original.
7. If you don’t like it, don’t sign it!
- If something does not feel right about the contract, DON’T SIGN IT.
- You will usually have the opportunity to sign at a different time, but once signed, it can be a nightmare and very expensive trying to get out.
8. Keep it confidential
- Business contracts are something you will want to keep confidential especially if they have sensitive information in them.
- You should expect the same out of the other party and in some circumstances, this can and will be discussed orally or in the actual contract.
- Remember we want this to be a long and healthy relationship so don’t be that guy or girl who reveals other people’s private information.
9. Hire an attorney
- Know the importance of the contract you are getting into and use your judgment to determine if you need an attorney, who specializes in such work, to review it.
- If you were starting a partnership with a friend that could potentially last a lifetime, you will want to hire an attorney.
- It’s worth the money upfront to get it right; if not you could spend MUCH more money in the long run.
- This is your insurance policy in case the relationship starts to fall apart.
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