How to Create Contracts for Your Business That Are Foolproof
Contracts are a necessary part of any business, as agreements will need to be entered at some point or another. And it is contracts that make these agreements legally binding and enforceable. That said, drawing up a contract can be a complex process, as you don’t want to leave any loopholes open that you could be questioned for later. So, if you are looking for assistance on how to create a foolproof agreement, here’s some Perspective & Wisdom about how.
The simpler, the better
No one enjoys reading an unnecessary and prolonged contract with many legal terms that can confuse the reader. Therefore, it’s better to keep a contract simple and concise, ensuring that the necessary information is under the applicable headings to make the agreement easier to read through and understand.
Don’t negotiate the wrong person
Suppose your contract is all drawn and ready to use, and you want to negotiate a deal with a supplier or customer. Then make sure you don’t waste time dealing with the wrong person when you require the permission and time of a person who’s higher up in the business. Finding out who you should deal with can be part of your information gathering strategy in preparation for negotiations. Again, this can get tricky as it’s not always easy to reach the right person. But if you are battling to get through to the person in charge, keep persisting until you eventually do.
Correctly identify each party
It is essential to list the correct legal names of all parties to the contract. This will clarify who is responsible for fulfilling their obligations and who you can potentially sue if you don’t keep up your end of the bargain. So, if a company is an LLC or a corporation organized under a legal name, you must identify the name in full, including the prefix or suffix, making sure the contract is not just with the names of those who signed the agreement.
All details should be included
The agreement's body should clearly outline each party's rights and obligations. Moreover, written contracts are usually more enforceable than an agreement entered into verbally. Just be sure that you include every detail you intend to include so that no point can be left open to dispute. And remember that contracts can be changed, even on the spot, if both parties have agreed to it and have signed their acknowledgement that they are aware of and accept these changes.
Specify your payment obligations
When it comes to negotiating payment terms, you should specify who is paying whom, when payments must be made, and the terms for payment to ensure your client is fully aware of paying their invoices on time. For example, an online invoice generator is a good choice for an invoice maker because you can create a professional invoice using a premade template where you just add in the necessary information. And it should allow you to download invoices in your preferred format.
From a financial perspective, it also helps to be thoroughly aware of your financial situation to negotiate accordingly by making sure that your payment terms align with your cash flow situation. Therefore, choose accounting software for your business that gives you an accurate indication of your business's financial health. It will provide you with the information in real-time so that when you do negotiate, you have precise information on which to base your decisions.
Speaking of software, similar tools that you can use to help draw up your contract include Bonsai, Shake, and Docracy if you need help to create a contract from scratch.
Specify the circumstances which will cause the contract to be terminated
It is wise to define the circumstances in which parties can end the contract. For example, suppose one party fails to meet essential obligations. In that case, the other party should be able to terminate the contract without too much hassle and without incurring liability for violating the agreement. However, if a dispute should occur, your contract should ideally indicate how the dispute should be resolved without going to court.
Ensure your contract is kept confidential at all times
When a business hires another business to perform a service, it will often have access to sensitive business information. That is why there must be an agreement that ensures each party keeps any sensitive business information they have become privy to confidential while the deal is taking place. Do all of the above, and you should have peace of mind that everything should go according to plan as per the agreement and that the contracts entered into will be done confidentially and in the best interests of both parties involved.
Corinne Hammond, who has worked in venture capital, corporate management, and finance, understands the stress that comes with the daily grind of running a business. She developed Be Biz Minded to offer quick access to educational resources for entrepreneurs and small business owners to help them feel as prepared as possible as they work to grow their businesses.