Contracts are the backbone of the business world. Without contracts, parties in business relationships would be unclear regarding their expectations and responsibilities, thereby making the conducting of business extremely risky. So, as a business owner, it’s important to understand the basics of contracting. In this article, we discuss some important things to consider when drafting a contract.
What is a Contract?
A contract is an agreement that outlines the responsibilities and obligations of the contracting parties. A contract is an imperative component of any business transaction because it solidifies the terms of the transaction and provides protection to the parties. Contracts are advantageous because they protect all contracting parties from legal issues and possibly lawsuits. In addition, contracts provide clarity regarding the expectations of all parties, which helps to reduce confusion.
When a Contract is Necessary
Although informal agreements between parties may be convenient on the front end, these types of arrangements rarely hold up in court. In other words, if a dispute arises between parties to a “handshake agreement,” proving the terms of the agreement can be nearly impossible, leaving the aggrieved party without legal recourse. Examples of situations that generally require a contract include:
- The purchase, lease, or rental of goods
- The hiring of a new employee
- The formation of a business partnership
- The sale of intellectual property
- The rendering of services
Important Contract Considerations
To ensure its enforceability and effectiveness, you should consider the following when drafting a contract:
- The contract should not favor you so heavily that the other party could challenge it as inequitable in court.
- You should leave some room for the other party to negotiate.
- It’s okay to use other contracts from your industry as templates. However, you should be sure to tailor your contract to address your specific situation.
- Be sure to include a section in the contract that clearly addresses pricing, payment due dates, and penalties imposed for late payments.
- You should include a termination clause that permits you to terminate the agreement should the other party fail to fulfill the terms of the contract or if the business relationship becomes unworkable.
- If you’d like to avoid courtroom litigation in case of a dispute, you should consider including a dispute resolution clause. When including a dispute resolution clause, you should specify who will pay for the cost of the arbitration depending on the outcome.
Contact a Florida Corporate and Business Law Attorney
If you are a business owner, you need strong legal representation. At Gueronniere, P.A., we provide excellent legal services to small business owners throughout the state of Florida. Led by founding attorney Grace de la Gueronniere, we have the knowledge and experience necessary to fulfill your corporate and business law needs. Please contact us today to arrange a free and confidential consultation with our talented Florida lawyer.