Business Contracts: Four Central Tips for Creating a Solid Agreement
If you are planning on establishing a business agreement with an investor, a partner or a contractor, you should draft a contract. Contractual agreements are crucial for protecting your interests and preventing misunderstandings in the future. You should keep in mind that verbal discussions and promises will be difficult to enforce. Therefore, you must ensure that an appropriate document is written and signed by the involved parties. Here are some indispensable tips for creating good contracts for your business.
Avoid Complex Wording
Business contracts are legal documents. However, they do not need to have a lot of jargon and complex sentence structures. In fact, if the contract is complicated, there is a higher likelihood of making a mistake which could be exploited in the future. Therefore, you should make sure that the document is clear enough for both parties. The sentences should be short, and the content should be in simple language. You should also number each section for easy referencing.
Utilise Correct Terms
You should always use the correct terms when referring to your business and the nature of the agreement in the contract. Do not allow the simplicity of your drafted document to have oversights which could create a loophole. For instance, the legal structure of your enterprise such as a partnership should be appropriately referenced as a corporation. This could lead to intentional or unintentional misunderstanding. Also, you must keep in mind that the contract must be drafted for the business, not the individuals signing it.
Include All Details
One of the problems associated with business contracts is the omission of critical details. For instance, when people negotiate deals in informal settings, they overlook the importance of including the contents in the contract. Unfortunately, if you do this, you will be at a disadvantage because omitted conditions will not be enforceable. If you have already prepared a contract and then you discuss a change to the agreement later, you can add an amendment. Alternatively, you can just write the changes and have the other party approve by adding their initials.
Finally, you should evaluate the possibility of the business agreement not proceeding as expected. Do not assume that your association with the other party will always be perfect. For instance, one of you might want to terminate the contract before the specified period is over. You should ensure that there are clear provisions for an exit clause. Moreover, determine the best options for dispute resolution.
If you are uncertain about your drafted business contract or other aspects of commercial law, contact a commercial lawyer.