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10 Tips for Creating Solid Contracts with Your Business Partners

Estimated reading time: 5 mins

Before entering a contract, make sure that it is a strong one. Ensure that your terms and agreements are legally binding and valid. In the course of developing a contract, be aware of the risks for your business. Try your best to allocate the risk between the other parties in the agreement.

It will allow you to give attention to other contract points to protect against certain risks that could impact your company. It is best to decide how to settle a dispute to avoid court trials like following the Federal Arbitration act. If a contract is poorly drafted or is one-sided, it can impact the relationship of the parties involved.

It should clearly reflect the business deal between the parties. In case when an attorney is preparing, make sure to communicate the contract terms clearly. A contract that is easy to understand properly allocates risks and accurately reflects the business ideas is most likely to be completed with success. This article will explain the essential tips to make your contract solid and enforceable. 

Get Your Contracts in Writing:

Oral agreements can be difficult to enforce even though they are legally binding in many situations. If a case is taken to court, the case can be dismissed because the oral contract terms aren’t enforceable sometimes. 

Make it necessary to get your contracts in writing even if the law does not require it. Having a document provides a source of evidence in clear words. It states the agreed contract terms and rights to avoid any confusion.

Keep Your Contract Simple:

You do not need to add a lot of difficult phrases and sentences to make a contract valid. A contract can be enforceable with simple language as well.

Create simple and clear sentences that clearly depict the rights and obligations to the parties involved. Make use of paragraphs and label them to give the readers a clear idea of what the contract says.

Mention the Correct Legal Name:

The importance of writing down the correct legal name of the business involved is highly important. Some companies do not pay enough stress on this matter. Include the right legal names of the parties, so it is clear exactly who is involved and falls under the contract obligations. 

Its importance can be viewed when something goes wrong, and you can legally address the party with the right name in the court. For example, if a company is known as an LLC, its name should include the LLC suffix rather than the names of the signing party’s members.

Negotiate through the Right Person:

Make sure that you are communicating with the right authority regarding the contract terms. If a junior member is involved, things can get complicated as everything has to be conveyed through the boss. In such a case, politely ask them to connect the person in charge.

Ensure that the other party has the genuine intention of binding with your business and fulfilling their rights. If you are not sure who has the authority, you can ask them. Usually, in a small business, it is one of the owners involved.

Discuss the Contract in Detail:

Besides writing everything down, make sure to spell out the terms and explain in detail. It avoids any future issues and eradicates confusion. But make sure that what you discuss verbally is also included in the contract, or else it will be not enforceable.

In case of leaving out an important point, you can include it by creating an amendment. Before signing the agreement, make sure to read it through and make changes by communicating with the other party.

Plan Out the Contract Terminating Conditions:

It is best to plan out all the possibilities before finalizing the contract. That includes agreeing on the conditions at which the contract will be termed as invalid. 

For example, if one of the parties involved does not fulfill their main obligations or misses too many deadlines, it should give the other victim party the right to terminate the contract. It allows smooth termination without going to court for contract violation. 

Determine Payment Methods:

When it comes to payment in businesses, it can cause problems without proper communication. Plan out the details like,

  • The time of the payment.
  • The part that will be paying and the one receiving.
  • The required conditions for making payments. 

Money can cause an obstacle if something goes wrong with the payments. Decide whether you want to make payments in installments or when the work is accurately done. The method of payment should be clearly stated as well. Some people might not have a business charge card like a small business. If you want a cashier’s check, make sure that you mention it beforehand.

How to Resolve Disputes:

It is the most important part of the contract agreement. Make sure that you plan out the methods in which you will be solving any future contract disputes. Agree on a way that can be used to settle issues smoothly.

You can decide whether you will handle it through arbitration or other means to avoid taking it to court. Court trials can take up a lot of time and money, so it’s best to avoid this route.

Pick a Specific State Law to Form a Contract:

When you are located in a different state than the other party, it can be challenging to stick to state laws. In this scenario, you can choose the rules of a particular state and create your contract according to them. 

It avoids any problems later when it comes to completing your contract. Make sure to specify in clear words the methods of dispute settlement so simplify the agreement.

Keep Your Contract Confidential:

When forming an agreement, your business information gets exposed to the involved party. Be careful on who you choose to create a contract as your sensitive data can leak out in a scam business.Before signing the contract, make mutual promises to protect the party’s reputation and keep the information safe during the contract performance. Make it a priority to keep the information strictly confidential.

 

About the author /


Simon is a creative and passionate business leader dedicated to having fun in the pursuit of high performance and personal development. He is co-founder of Applied Change, a Business Change consultancy based in the UK. Simon is also an Ambassador for Gloucestershire business. Simon is an Associate Member of the Chartered Institute of Professional Development.

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