Tips for Creating a Valid Business Contract

No matter what business you’re in or what kind of company you run, at some point (soon), you will need to create or agree to a contract of some sort. The litigation experts at Prudent Law recommend that you always consult a corporate lawyer whenever a contract is involved, but if you are drafting the contract yourself, the following tips will help ensure the contract is valid and will stand up in court.

Get It In Writing

Yes, verbal agreements are usually legally binding, but they are almost impossible to prove and enforce in a court of law. In some cases, verbal agreements aren’t valid at all, even if you have a recording of the agreement. In the business world (and pretty much everywhere else), all contracts should be in writing. Not only do you have written proof that an agreement was signed, but you also have each party’s responsibilities and rights documented in case of a dispute.

Negotiate With the Right Person

Don’t waste your time working out a business deal with someone who doesn’t have the authority to sign the final contract. If that happens, the other party may have a legal right to void the agreement. In any case, you’ll spend time in the courtroom trying to get the contract enforced instead of at your company making money.

To avoid this situation, ensure you’re dealing with the right person from the start. Always ask if they are the person who makes decisions in the company and has the authority to enter into a contract with you. In a small business, this is probably one of the owners. In a larger enterprise, it may be the CEO or COO of the company. Sometimes, it’s both and you’ll need both signatures to bind the contract.

Keep It Simple

If you’re not going to involve a litigation lawyer, make sure the language you use in your contract is simple and clear. There is no need to make it full of legalese that looks fancy but means nothing. Lawyers know how to use legal language to formalize a contract, but you probably don’t. And that’s okay. Short, clear sentences that directly state the terms of the contract and each party’s obligations and rights work just fine.

Identify Each Party Fully and Correctly

To ensure the validity of a contract, make sure you use the full legal name of the party or parties to the contract. This means that if the company is an LLC, you put LLC after the company name. You can find the legal name registered with your local government to ensure you’re identifying the party correctly. You don’t want to leave any wiggle room for the other party to deem the contract unenforceable.

Provide All Details, No Matter How Small

The majority of the contract should spell out every single obligation and right of each party to the contract. Do not leave anything out. If you are on the fence about including something, err on the side of caution and include it. If there are payment terms, be extremely specific about when, where, and to whom those payments will be made. Dates, times, and locations should all be extremely clear so that there is no confusion on either side.

Conclusion

Contract law is complicated and even the most ironclad contract can be disputed. But, if you follow these tips and consider getting advice from a corporate lawyer, you’ll be in a better position to enforce your contracts even if they are disputed.