Making a business contract? Here are common mistakes you must avoid
A poorly constructed business contract can spoil all the hard work you put in to create your business empire. Many businesses suffer a significant loss because of mistakes made in a business contract. If you want to make sure that this doesn’t happen to your business, you need to know about things that could possibly go wrong in a business contract. So, in this article, we will discuss some of the typical business contract mistakes to avoid while preparing one
Not having a business contract
The biggest mistake one can make is skipping a business contract altogether. It happens mainly when you are a startup or you are going into a business with a person who you know. Startup owners are generally in their learning phase and do not have appropriate information about running a business. As a result, they skip making a business contract and suffer its repercussion later. If yours is a startup, then you must keep a written record of every agreement to ensure your business is safe.Furthermore, when you are partnering for business with a known person, you might feel there is no need for an official document to get going. But, when it comes to business, it is best to have some rules set. What if you face a dispute in the future and there is no official document to help you take action? A verbal agreement is never a good option. You need to have a written agreement in place. You need to have a proper business contract to take appropriate actions in times of crisis. A business contract will ensure there are no hurdles in your business and promote growth.
Not considering breaches
It is a must to include what constitutes a contract breach and its consequences in a business contract. It must contain information like:
- Exemptions for innocent parties
- Monetary fines for those who have breached the contract
- The severity of the types of breaches
- Issues that lead to litigation
If a business contract fails to provide legal action and solutions to breaches, a business is subjected to bear big losses in future.Additionally, a business contract must contain information about the termination clause. A termination clause is a way for both the parties to get out of a deal. Often people hesitate to include termination clauses because they don’t want their business partners to find a way out of the contract. But, mentioning a termination clause is always beneficial as it prevents the need for lengthy and costly litigation.
Considering pre-made business contracts
You may find many business contracts online. These pre-made business contracts may make you feel tempted to use them as they are an attractive and inexpensive option. But, it is better to prepare a business contract with the help of a legal professional. A pre-made business contract may make you miss out on important details such as termination clauses, how to handle breaches, and guidelines. Also, it may contain some irrelevant information that may not go with your business. When you make a business contract, you include all the relevant and necessary information pertaining to your business and the way you wish to handle matters.If you are seeking help in making a business contract, then get in touch with us at Prowse Chowne LLP. We provide contract services to our clients to help them get into a valid contract, saving them from legal implications.