Tips for Drafting a New Business Contract
Contracts are essential to the operation of your business. They provide a legally binding framework for vendors, customers, and clients as you seek to build revenue. Business contracts also define your relationships with other entities or individuals when you buy products or services vital to your company’s success.
You’ll need the assistance of a business attorney to help you draft new and meaningful business contracts that will help your company succeed.
What is a Business Contract?
A business contract is a written agreement between two or more parties that creates legal obligations between them. Everyone has clear rules as to what they must do and by when. Once signed by all parties, a business contract becomes a legally binding document.
What Vital Information Should Be in Each Business Contract?
Each business contract you sign should have vital information, such as:
- Names of all people, parties, groups, and/or entities involved in the contract.
- Specific Services to be provided.
- Required payment amounts.
- Payment due dates.
- Term (duration of the contract).
- Any automatic renewal clauses or automatic opt-out clauses.
- Potential damages and remedies for breaching the contract, such as missed deadlines, incomplete services, or lack of payments.
Tips for Drafting New Business Contracts
Iron Out the Details Ahead of Time.
A business contract offers a specific, written framework for a business relationship. However, you need to talk to all parties involved before creating the written document. Go over the details of what should be included in the contract.
For example, a landlord and tenant are negotiating the terms of who can live in the property, how many people, how much the rent is, and when the rent is due. Talking about these details before signing a lease agreement means there aren’t any surprises when the landlord and tenant sign the lease.
Make Sure the People Who Sign a Contract Can Legally Represent Each Party.
The people who sign a business contract should have the legal authority to represent each party. Business executives, owners, and partners are good examples of people who can sign contracts on behalf of a company.
Set Forth Clear Responsibilities and Expectations for Everyone Involved.
The entities signing the business contract must know and understand precisely what is expected of them and when. Do not leave anything out. Verbal agreements and handshakes are not enforceable in a court of law if there are issues later.
Specify Who Pays What, When, and to Whom.
The payment terms must be clearly outlined, including how people must transmit funds and when. Outlining the payment details is extremely important because business contracts always deal with particular sums of money.
Always specify a valid termination clause that states how a contract can end. Sometimes this means the delivery of a certain quantity of goods. Other times this means after a certain period has elapsed (six months or a year). Missing payments or delivery deadlines can offer ways for parties to easily exit the contract without being held legally liable for terminating the contract.
Have a Business Lawyer Prepare the Contract! (This is the most important tip)!
You want to make sure your company is covered by having every important detail in a business contract covered properly. Contact our office or call (616) 458-3994 today for a consultation on how we can help your company with your business’ contracts.