Understanding contracts is crucial knowledge for the small business owner. Whether you are new to business, or a seasoned entrepreneur, you can benefit from reviewing the basic structure of a legal contract. In this article we will review some elementary steps to creating an effective contract.
1. Contracts Should be in Writing
It almost goes without saying that you should get everything in writing. Verbal contracts are not reliable and may not be enforceable under certain circumstances. It is best to use written contracts that specifically spell out the terms of the agreement.
2. Speak English
Make sure to use clear, understandable language in a written contract. Even though you are creating a legal document you don't have to write like a business law attorney. Use everyday terms to describe products, services or locations. Try not to use too much industry jargon unless it is clear that both sides understand the term.
3. Be Specific
Use very detailed language to avoid challenges to the document. Make sure to use proper names for parties to the contract, and note specific dates when necessary. Do not allow any wiggle room in your document. You may need help from a business attorney to make sure your contract contains enough specificity.
4. Be Up Front About Payment Info
One of the most important sections of a contract is the payment section. This is what allows one party to receive compensation for their services. Yet, it is important to make sure that payment amounts, dates and methods are clearly defined to each party's satisfaction. You're in business to get paid so make it easy to get the money.
5. Don't Forget State Law Issues
Every state has its own laws concerning the formation and performance of contracts. It is important you understand how your state deals with each issue. For a thorough overview of the applicable state law issues you may want to contact an experienced lawyer who practices business law. An experienced attorney can help you create a contract template that can be used for all your business deals.
6. A Word About Contract Termination
Each contract needs to state how and when it will end. You may include termination events such as a failure to pay or a late delivery. You might also decide to make a contract dependent on a certain period of time. Either way, it is good to have a clear, defining action that will terminate the obligations of one or both parties.
As you can see from above you need to make sure a contract is covered from beginning to end. It is best if business owners seek out counsel to assist them in creating contracts. Doing so helps them to limit liability and to avoid any undesired effects. If you have an issue in business law contact the law office of Spencer and Collier, LLC.