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Avoiding Common Contract Mistakes

A well-drafted contract can mean the difference between life and death for any business, particularly a small one. With so much of a company’s resources, time and energy on the line, every business’ decision-makers need to ensure that the contracts being signed are in the business’ best interests and protects the business’ rights for the future. Having a basic grasp of the art of contract drafting can prevent a business owner or manager from entering into ill-advised or foolhardy contracts.

Be on the Lookout For…

There are several things that a savvy consumer or business entity should be on the lookout for when entering into a contract with another individual or business; keeping an eye open towards potential red flags can save valuable time, money and energy that could be used more productively. In simplest terms, successful contracts should be:

  • Written – yes, oral contracts are oftentimes enforceable by courts, but it is simpler and more prudent to get all business dealings in writing, particularly those with detailed provisions and high dollar values
  • Easily understood – the majority of commercial contracts are drafted by attorneys and contain provisions in so-called “legalese,” but legal jargon is not required for a contract to be enforceable; in fact, contracts written in plain language that is easy for all parties to understand are more likely to be upheld in a court of law should a dispute arise
  • Detailed – contracts should be all-encompassing; they should be forward-thinking enough to anticipate and address possible disputes (at least major ones) like breach of contract, and include enough detail that even someone who is not a signing party to the contract could easily fulfill its terms
  • Scope – any agreement should carefully describe the scope of performance. For instance, an agreement to undertake a printing job, should explain whether this contemplates obtaining the paper, ink, the distribution and delivery of the final product. Simply describing “printing services” will lead to confusion.
  • Compensation-the basis for compensation in a contract can be complicated, and based on a number of contingencies. Payment terms should be clear and carefully define any contingencies which must occur before the duty to pay arises. Within the construction context, agency or city acceptance of the work might be one definition of complete work.
  • Have an end-date – even the best business relationships end at some point, and contracts between business entities should address that eventuality, making provisions for winding down the relationship after the terms of the contract are fulfilled. Carefully define when the contract will have been performed, or a date by which the final scope is to have been completed. Leaving the contract indefinite as to termination can leave you open to liability for months or even years after the essential terms of the contract have been done.

Before You Decide to Go It Alone…

Of course, even the most well-intentioned contract drafter can make mistakes that could make an otherwise rock-solid contract unenforceable. If you are considering a contractual relationship, it is best to have a skilled business law attorney on your side to protect your business’ interests before, during and after the contract is signed.

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