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5 errors to avoid when creating a business contract

| Apr 5, 2021 | Business Formation & Planning |

The idea of a written business contract is to formalize the working relationship between you and another party. It sets out the rules and protects each party if the other side breaches their contract. When breaches occur, many businesses find their contract does not provide them the protection they thought it did.

You need a contract that will stand up in court

When a contract breach occurs, the first thing you should do is check your agreement. Here are five common reasons that contracts do not serve you as well as you hoped:

  • The contract was illegal: The law cannot uphold a contract related to anything illegal.
  • The contract was unfair: When a court examines a contract, it will see what is in it for both sides. It often crops up when employees challenge non-compete agreements. They need to benefit somehow in exchange for agreeing not to compete.
  • The contract was out of date: It is best to agree on time limits to contracts. If you do, make sure you renew them before they expire.
  • The contract was vague: If you want to put something like a force majeure clause, define it. If you wish to exclude lightning strikes, say so. When you fail to clarify things, a court will typically rule in favor of the other party. They do not expect others to read your mind.
  • The contract has errors: You might not understand the subtle difference between specific legal terms. Poor wording or forgetting to include something are all easy errors to make.

If you want a business contract that protects you, seek legal help to ensure it is well written. Time taken when drafting the agreement could save you a lot of time and problems later.