Every business will have to make new contracts at some stage, and the consequences of getting them wrong can be huge. What issues should you look out for?
When you start making lots of business contracts for new customers and partnerships, it’s a sign that business is booming. The consequences of getting those contracts wrong, however, are huge.
That’s why it’s important to know the most common issues associated with business contracts, so you don’t make the same mistakes yourself. Here’s what you need to watch out for:
1) You haven’t considered what constitutes a breach
When drawing up a contract, it’s important to think about anything that might go wrong in your new business relationship and how that might be solved. For example, what if the other party doesn’t deliver a service on time? How will you resolve this? The exact details of any potential breaches should be included in your contract – considering this at an early stage also means you’ll know how to resolve any issues that do occur and the potential damage to your business will be minimised.
It’s important to consider exactly what constitutes a breach of contract so you know how to resolve it.
2) The contract doesn’t include dispute resolution provisions
Requiring a Court or Tribunal to decide how to resolve a contract conflict is very expensive. Instead, it might be a good idea to include provisions for alternative dispute resolution. This will involve getting an independent third party to help both parties come to a resolution. While parties don’t have to come to a resolution, once a mediation agreement is made it’s binding, so it’s best if both parties still have a relatively good relationship.
3) You’ve not established the relationship with other contracts
Using language that’s too broad makes for many contractual issues further down the line.
If you have several contracts with the same party, how does this new contract fit in with them? Does it supersede the others, or will it work alongside them? The exact details must be included in all the contracts.
4) The contract is too vague
Using language that’s too broad makes for many contractual issues further down the line. For example, consider the word “includes.” This can mean anything you mention in the contract, but also anything else that might not be mentioned. To be exhaustive, it’s better to use “means.”
It’s a good idea to hire a lawyer when you’re writing your business contracts, to ensure you don’t make any of the mistakes above. Contact us today for more information on how Turnbull Hill can help with business contracts.