Almost every business enters a written contract sooner or later, and they only grow in importance as your business grows too. The future of your business relationship is defined the moment you draft the contract, which oftentimes represents a daunting task.
Whether you turn to professionals or draft contracts yourself using legal document software, a well-crafted agreement can help you secure your business and avoid potential breaches of contract and business disputes. Here are five tips that will make the process of concluding your next contract a walk in the park.
1. Write out your contract using a simple language
Even though verbal agreements are binding and are enforceable in most courts, they can end up creating a disaster for you if you do end up in court. Quite simply, the terms of a verbal contract can easily be misinterpreted or misremembered.
Make sure to have written proof of the agreement with specific terms that define the obligations of both parties involved.
There is no reason to insist on overwhelming and/or confusing legal jargon. If you want all parties to understand what exactly they are signing, use simpler language while writing the contract. Breaches are less likely to occur if you clearly define all of the terms, including the consequences of the breaches.
2. Keep it detailed and ensure that each party is identified
A business contract should never be vague. When written down, the rights and obligations of the agreeing parties should be unambiguous, not leaving any room for interpretation. You should also add a written amendment to the contract if any of the parties want the terms updated. Repeat the same step if a change happens to an existing term.
Additionally, an often ignored aspect in concluding business contracts is the proper use of legal names of the parties involved in the agreement. Make sure that you are using proper names for the parties that are bound by the contract. For example, a contract with a business entity should always include its full corporate name, an Inc., or an LLC. The personal names of the parties signing the contract won’t be as important.
In 2021, there are many legal document software solutions available. This is the most straightforward way to ensure you’re not making mistakes while drafting business contracts. These solutions use AI to help you craft legal documents faster. For instance, you can quickly review key contract details by grouping them under the different categories, enabling you to instantly edit and review highlighted items. These can also be a valuable tool for formatting and editing which matters.
3. Don’t forget to include payment details
If payments are a part of your business transaction, make sure to specify all of the payment terms. Since most contract disputes are money-related, the last thing you want to overlook while you draft the contract is financial details. You should be precise and specify everything from when the payments are due, conditions of the payments, and even the type of the payments.
Remember, you can still rely on legal document software to simplify the process of drafting and ultimately, keep track of all the agreed-upon terms outlined in the contract.
4. Pay attention to confidentiality
Some things should stay confidential. This includes your business practices and trade secrets.
In a business contract, the other party might gain insight into the inner workings of your company. Needless to say, you probably don’t want your business practices shown to the public. If that’s the case, you should include a clause that prohibits the other party to disclose your business information.
5. Discuss the termination of the contract
Last but not least – nothing lasts forever, and especially not contracts. Since all contracts eventually end, you should specifically define the details of the contract termination. One of the parties can usually terminate the contract at any time if they want.
Still, if you want to protect your business in the future, the best course of action is to include a clause that allows you to terminate the contract if the other party is, for example, holding back payments after a certain amount of time.
This ensures that you don’t end up as the offending party if you breach the agreement after not receiving your hard-earned money.
Take nothing for granted
When concluding a business contract, it’s always better to play it safe. A business partnership is only as strong as the agreement that you put on paper.
Make sure that the contract you write is detailed but easy to understand, with all of the terms clearly outlined and defined. Being aware of the possible mistakes and nuances will help you protect your business from potential breaches of contract that could transpire in the future.
Even though business contracts might come across as overwhelming, luckily, help in the form of legal document software is readily available. It can help you simplify and speed up the entire process. With all the information outlined here, the task of concluding business contracts shouldn’t seem like such a problem anymore.