A contract is serious for any participating party. These are legally binding agreements and they protect your interests, even if things go wrong. You need to consider exactly what goes into contracts you sign, whether with suppliers, clients or other third parties.
Even a perfectly drafted contract is no insurance against bad behaviour. Someone who is intent on breaching an agreement will go ahead and do so. But a well thought out contract that accurately and completely describes the details of a business agreement can prevent accidental misunderstandings and the expensive litigation that may follow.
While discussing over your contract keep written, dated notes, lists of the items discussed and the settled upon resolution of open items. A contract is a written record of the agreement reached, so make sure that you have actually reached an agreement on important issues and even the ones that may not seem important at the outset.
2. Document negotiations
Write it all down in plain language that everyone understands and circulate it among every member of the party to the contract to make sure it captures everyone’s thoughts and intentions.
3. Work with an Attorney
Take your memo, lists and notes to an attorney for his or her review and revision. Your attorney’s job is to catch issues you may have missed. An attorney is worth the investment as he or she will ensure your contract is complete.
4. Define terms
One thing your attorney is nearly certain to do will be to add a section that defines important terms. It is simply a measure that prevents misunderstanding, and is one of the hallmarks of good legal drafting. Make sure you have input on terms that have particular meaning in your industry.
5. Plan for disputes
Include some non-judicial remedies in the event of a breach. These may include insurance, indemnities agreements or mediation. This is important to consider. Everyone loses in a lawsuit, so it is best to decide how to solve disputes out of court before any arise.
6. Payment consideration
Ask for your attorney’s advice on payment terms. Should funds be held in escrow to be released on the achievement of certain benchmarks? Should there be an early completion incentive or a late performance penalty? What are the remedies if the contractor abandons the project, and it is never completed?
7. Don’t start until it’s signed
Don’t start any work or exchange any money before the contract is signed.
8. Monitor performance
Record any changes or developments surrounding a contract. keep the written record up to date as well.