How To Ensure That Your Business Contract Is Enforceable

Simply put, a contract is any written or spoken agreement between two or more parties designed to produce a legally enforceable outcome. If you own a business, you should use a written contract for anyone you are doing business with, such as vendors, employees and consultants.

While a contract sounds simple, that’s not the case. Drafting a contract on your own is a sure fire way to guarantee legal problems in the future. Not convinced? Consider the following:

1. The Laws In Every State Are Different

   The rules governing contracts vary from state to state. If you draw up a contract that does not comply with the laws of the state where you are doing business, you may find that the contract will not be enforced as you expected.

2. Essential Elements Can Easily Be Omitted

   Every contract must have an “offer,” an “acceptance” and some form of “consideration.” That’s just the tip of the iceberg. There should also be clauses for selecting the state laws that govern enforcement of the contract and for indemnifying a party for certain acts of the other party. The clauses drafted into the contract are key components that need to be determined with the advice of an attorney.

3. Termination

   Every contract should include a plan for terminating the relationship. For example, will it be terminated by agreement of the parties or does it terminate automatically? Should renewal terms be included in the contract? What happens if it terminates due to breach of the contract terms? Will compensation be due? Those are just a few of the many questions you will need to discuss with your attorney when drawing up a contract.

4. Breach of Contract

   If a breach of the contract should occur, you may want to include terms that allow the breaching party to “cure” the breach before taking legal action. If the breach is such that it becomes necessary to take legal action, it will likely be expensive to litigate. Thus, it may be important to talk to your attorney about perhaps including a mediation or arbitration clause.

5. Protecting Your Assets

   If your company deals with proprietary information or is developing a new product, it is important to include non-compete and confidentiality clauses. If these clauses are not present, an employee or contractor could use your hard work to assist another company to develop a similar product or start a competing business.

These are just a few of the considerations involved when drawing up a contract. While it may initially seem cheaper to go it alone, legal disputes are costly and can easily exceed any upfront costs you will pay by seeking the advice of an attorney licensed in your state.

For more information on writing a business contract contact us today for a free consultation!