As a business owner, you must know all about the contracts and agreements needed to run a business. Even if you will be hiring a professional to draft your business contracts, you still need to understand what makes a good contract. In this article, we’ll give you 5 tips for creating the best contracts.
Get it in Writing
While it’s true that oral agreements are legal, they are difficult to enforce in court and there are situations where they can’t be enforced at all. When it comes to business contracts and agreements, you should always make sure that they are expressed in writing. With a good contract lifecycle management solution, you can avoid the repetitive process of drafting the same contract multiple times.
Keep it Simple and Spell Out the Details Clearly
Contrary to what some lawyers and business owners may think, you don’t need a complex vocabulary in your contract to make it enforceable. In fact, it’s better to use simple language that can be easily understood so that the parties involved in the contract will have a good idea of what they are getting into. You should also spell out the details clearly for all parties.
Agree on Circumstances that Terminate the Contract
As part of writing a good business contract or agreement, you must agree on the circumstances that terminate the contract, and put them in writing. Aside from that, you also need to agree on the right way to resolve disputes when they arise. This way, all of the parties involved will know what to do if the contract is breached.
Specify Payment Obligations
Another crucial thing to include in your contract is the details of any payment obligations. Specify who should pay whom, as well as when the payment must be made. Aside from that, you should also indicate the conditions of the payment, such as whether payment in installments is acceptable. Remember that money can be a contentious issue, so it is best to spell out the payment obligations clearly.
Pick a State Law to Govern the Contract
In a situation where you and the other party are in different states with different laws, it is important that you choose only one state law to govern the contract. That way you can avoid sticky legal situations if things go south. In addition to that, you should consider determining where you will mediate, arbitrate, or bring legal actions under the terms of the contract.
Keep it Confidential
Contracts and agreements are confidential, so you should make sure that your business contracts and other sensitive information do not get into the wrong hands. If you will be employing the services of a third-party, do not give them access to your business contracts unless all involved parties have consented. It is recommended that you state in your business contract that the parties involved must not share any information detailed in the contract.
With these tips in mind, you can create the best business contracts and agreements. Remember to put everything in writing and make sure that the terms are simple and easy to understand. Aside from that, don’t forget to specify conditions for terminating the contract and how to resolve disputes. For further help, you should hire a professional to assist in writing your business contracts.