Business contracts are more than the promises the ventures give or handshakes between the decision-makers. It can be disastrous to enter into the agreements without drafting an excellent contract protecting the business from potential challenges. Although it is impossible to foresee problems initially, it is critical to have a contract covering the venture from various business and legal risks.
A business needs to have objectives on why they are entering into a deal. The terms and clauses should protect the company from circumstances that may happen during a contract’s lifecycle. Below are tips to help with the contract development;
1. Have a Written Agreement
The verbal agreements are not admissible in a court of law if there are disputes about the deal. Therefore, it is crucial to draft a contract that each party will sign. The initiative makes the agreement legally binding, and there will be implications if any party breaches the agreement.
Since the wordings in a contract play a critical role in protecting the business, a venture should employ efficient systems to help with the tasks. The ContractSafe.com platform can streamline the contract drafting process while ensuring accuracy and compliance with the contracting standards. A contract management system is essential throughout the contract’s lifecycle, and ventures need to utilize the platforms for their benefit.
2. Be Clear about the Parties in the Contract
It is critical to be clear in identifying the parties who are getting into the contract. Ensure you write the names correctly as a minimal change can refer to a different entity. It is advisable to use the registered name for the business and the legal identification documents for individuals. Failure to name the parties correctly will be disastrous whenever there is a breach of contract. Therefore, it is essential to protect your business from dangers by using the proper names.
3. Negotiate with the Decision-Makers
It is critical to negotiate with individuals who have the mandate to enter into contracts on behalf of a company. Consider the senior management, who are the decision-makers in a business. Negotiating with a junior staff will not bear fruits as the terms may be worthless. It is crucial to identify the right people to negotiate with to ensure you get the best deal.
Since the negotiation process happens at the initial stages of the contract lifecycle, ensure you can get talking with the decision-makers early enough.
4. The Obligations
The clauses and terms in a contract should incorporate every party’s obligations towards honoring the agreement. It should not be vague or offer room for varied interpretations but be clear on the responsibilities. Ensure you amend the contract if anything changes in business operations within its lifecycle. The digital contract management applications make it easy to update any changes to the initial agreement.
Communicate about the impending changes to all parties beforehand to ensure they are onboard the new terms. There are implications to changing a legal agreement without consent from the other signatories.
5. Include the Terms for Payments
Since business contracts are primarily economic, the document needs to be clear about the payments terms. It should spell out the conditions for payments, the timelines, and one paying. The mode of payment should be in the contract to prevent complications. Indicate whether it should be a bank transfer, check, or cash payment.
6. Include details about the Termination
Although an agreement might seem appealing at the initial stages, it may not be the same later. The deals will inevitably come to an end. Therefore, it is vital to include a clause about the procedures for the termination. In most common instances, a business might end the agreement if the other party breaches the contract. Also, determine if the contract will last a particular duration, or either party can terminate it at any time.
7. Have Procedures to Resolute Disputes
There are likely disputes that may arise during the contract’s lifecycle. Mediation and arbitration between the parties is the best option before seeking legal redress. The move is affordable, unlike going to a court of law to seek dispute resolution. So, it is better when the parties can sit down and resolve their issues.
On the other hand, there are chances that the disputes might require going to court. In this instance, it is vital to protect your business by ensuring the case takes place in your region. It will be costly to go for court proceedings in a different state than where the company operates. Ensure you include the clause on where to take the legal issues when they arise.
Although business contracts are legal documents, they should not include complex terminologies from the school of law. On the contrary, it needs to be simple to understand for both parties since they will probably not be legal experts.
Businesses need to keep the contract process confidential. Include the clauses to protect your business from other parties sharing company information. It will ensure compensation when it happens.