From negotiation to termination, contracts are hard – but they are also indispensable. Whenever you decide to do business with someone, whether that means hiring them as an employee, using their services on a contract basis, partnering with their business, or even selling to them, you must use a contract to make your agreement legally binding. Most business owners make many mistakes with their first few contracts, and some errors can be extremely costly. If you want to make your first contracts as strong as possible, you need these tips for doing contracts right.
1.A Little Less Conversation
Perhaps the number-one rule for doing contracts right is: do written contracts. Too many businesses assume that conversations or spoken agreements are enough to solidify arrangements and ensure cooperation from all parties. While some states do permit oral contracts, the circumstances in which they are truly legally binding are extremely specific. As a result, they are almost never enforceable in court.By getting your contracts in writing, you not only produce a copy of your agreement that both parties can reference, but you also generate a document will stand up in legal disputes. To that end, you should strive to make your contract as clear and concise as possible.
2. Know Whom You’re Talking to
It is a waste of time to negotiate with someone who has no authority to sign your contract. It doesn’t matter whether you are merging with another company, acquiring a new vendor, or buying a company car; you should never bargain with junior professionals who must constantly obtain approval from their bosses. From the get-go, you should be certain you are speaking with someone who has the knowledge and power to understand your contract’s terms and make legal agreements. Otherwise, your contracts will take twice as long to make and have half as much potency.
3. The Devil in the Details
The goal of any contract is to explain the rights and obligations of both parties to eliminate confusion and encourage cooperation. If you rely on vague statements in your contract, it’s unlikely you’ll get what you want. Your contract should be filled with details, especially those important to the completion of the agreement. Such details should close loopholes and ensure both parties benefit from the deal. Fortunately, vague statements can be qualified later with written amendments signed by both parties – but you should strive to make a contract as detailed as possible the first time around.
4. Keep It Secret, Keep It Safe
Not all contracts include sensitive information, but plenty do. To be safe, you should request mutual promises that each party maintain strict confidentiality regarding information gleaned during the building of the contract and the completion of terms. You might even go so far as to require parties to demonstrate sufficient digital security, especially if they are saving your contract digitally; in the modern age of cyber-crime, data breaches can come from anywhere. It is best to be certain of your security – and have a contract certifying it.
5. Keep Every Contract in Its Place
For a contract to be useful, it must be readily accessible; a lost or forgotten contract might as well not exist. Smart contract lifecycle management requires a strict organizational system for your contracts, so you can quickly and easily review your relationships and rights. It isn’t necessarily prudent to manage your contracts alphabetically or chronologically because these systems often fail to provide the most important information contained in your contracts. Cutting-edge contract management systems are automated to provide alerts regarding upcoming renewal dates as well as a bevy of other advantageous features.
6. Constant Vigilance
Finally, contracts shouldn’t be written and forgotten. For a contract to mean anything, you must be prepared to terminate it should the other party fail to uphold their end. During contract creation, you should agree on terms of termination. Then, as long as the contract is active, you should remain vigilant for behavior that triggers those terms. Though you might not want to terminate the contract immediately, you should contact the offending party and discuss options for resolving the existing dispute – or better yet, you should build rules about arbitration or mediation into the contract, too. If you take your contracts seriously, the other parties will, too.