You should be using a contract anytime you need to regulate the relationship between your business and another business or person. A contract defines how the relationship works, what each party is agreeing to provide, and what happens when one side does not fulfill their part of the agreement.
A successful contract will reduce uncertainty, provide clarity on each party’s rights and obligations, and protect both sides.
How to Write Bulletproof Contracts
You don’t have to be a lawyer to write a contract, but in most cases, it’s quicker, easier, and safer to leave it to the experts. If you do want to write a contract yourself, here are some of the things you need to be aware of:
Don’t Rely On Oral Contracts
An oral contract can be enforced, but it is much harder, and there are many more things that can go wrong. It’s not unusual for people to forget or misremember what they have agreed to, or for two parties to later disagree on the exact terms of the agreement. It is very hard to prove either way which one is correct.
Choose Your Words Carefully: Many Words Have Specific Meanings in Law
To protect against ambiguity, many words are given specific meanings in legal documents – and these meanings won’t always tie-in with your understanding of them.
For example, in conversation, bi-monthly is commonly used to mean both “twice a month” and “once every two months”. In a legal document, bimonthly means every other month; semi-monthly is used to mean twice a month.
Getting this detail wrong is the difference between making a legal agreement to provide a service once every two weeks instead of once every two months – for the same price! Mistakes like these can get expensive, quickly.
Your contract must include as much detail as possible about the goods or services the businesses are exchanging. For example, if you are receiving payments as part of the agreement, you should specify what date payment is due, how the payment can be made, and what penalties apply if the payment is late.
If you are selling a service, you need to describe precisely what the service is, who is doing it, how it will be provided, any limits it has, etc.
Describe How and When The Contract Terminates
A contract should specify how and when it terminates, which should be in one of two ways. Either it plays out as agreed with both sides keeping to the agreement (in which case it terminates once each party has fulfilled its side), or one side breaks the agreement and the agreement is terminated prematurely.
In the case of a breach, the contract should stipulate what action the other party can take and how disputes can be resolved. For example, you may wish to provide a clause for mediation in order to avoid litigation.
Make Sure It’s Enforceable
All these steps count for nothing if your contract can’t be enforced in a court of law. The best way to ensure this is to work with a contract lawyer to check that everything is correct and that the contract does what you want it to.
Signing a contract can feel like a risk, but it’s riskier not to have a contract. That perceived risk comes from a lack of understanding of what the contract means, and of whether it is fair to your business: that’s something that a contract lawyer can help with.
Writing your own contracts comes with similar risk. Unless you’re a contract lawyer, you probably don’t have the knowledge necessary to write the contract correctly. While we have no doubt you could learn contract law, given enough time, it’s not worth it. Instead, contact The Contract Company.