Tips and Tricks for Air-Tight Contracts
A contractual business relationship between two parties is an important and legally enforceable agreement, or set of agreements. There are two types of contract: verbal and written, although it’s possible to have some combination of both. However, if it’s air-tight contracts you’re after, it’s highly recommended you opt for a written contractual agreement.
- TIP: Contracts can be complex. Before you sign anything, it’s very important to make sure that you fully understand the terms of a contract.
Now, whilst it’s always advised to seek legal and professional help before entering into complex contractual agreements, it’s possible to attain a competent level of knowledge yourself. There are ways to avoid the pitfalls that can undermine the legal efficacy of contractual agreements.
Essential Elements of Contracts: Know Your Language, and be Detailed
This first point may seem obvious, but we think it’s vitally important. Make sure to use language that both parties understand. The best contracts are written in plain English so that both parties know where they stand, what their obligations are, and what process they can expect to follow should either party fail to fulfil their agreed upon obligations.
- TIP: If you purchase creative work, such as the design of your website, copyright will remain with the creator unless explicitly agreed otherwise. If you’re looking to own all the rights to the materials you pay to have created, make sure to sort this out contractually to avoid pitfalls down the line.
Secondly, make sure that your written contract is as detailed as necessary. How detailed is that? Detailed enough to leave no room for interpretation. If agreeing to complete a task by a certain date, make sure to include that date specifically, rather than indicate the vague time of the month or year when that date occurs. For example, ‘by March 15th’, rather than ‘by the middle of March.’
If both parties agree to alter the terms of the contract at a later date, make sure to detail these changes in writing as amendments.
Essential Elements of Contracts: Payment Details, and Termination
Unsurprisingly enough, contract disputes often centre around money. So it’s crucial for a written contract to include details as to how payments will be made. If you have a preference for payment type or instalment frequency, make sure it’s clearly stated.
If you wish to include stipulations that call for payments to be made in accordance with work completed to a specific timeline, this is something to detail very precisely. If a service or good is only valuable for a specific duration because it is part of a greater project which has a delivery date all of its own, you’ll want to be as clear and upfront about this as possible.
- TIP: If it’s not possible to sort out a written contract, make sure to have other documentation such as emails, quotes, or notes about discussions you’ve had to help both parties identify what was agreed.
An air-tight contract will also include language as to how termination of the contract will occur. To protect your business, you’ll want to have a clear and agreed upon mechanism in place to govern the cessation of a contract should one party breach the terms of agreement.
One option is to set up a mutual termination agreement that applies when the objectives of each party have been met. Another more common agreement is to allow either party to terminate the contract should the other party continually fail to meet their obligations.
You can also include a frustration clause to allow for the termination of a contract due to unforeseen circumstances. A convenience clause will allow either party to terminate at any time by providing an agreed upon period of notice to the other party.
Once again, be specific, and carefully consider exactly what you need from the other party.
Essential Elements of Contracts: Confidentiality and State Laws
It can often occur that your contract partner will gain access to information about your business that you wish to keep confidential. Trade secrets, deals with suppliers, and business practices that you believe give you a competitive edge are often worth protecting. If you wish to keep certain information confidential, inserting a clause to bind the other party from disclosing said information is necessary.
- TIP: Make sure that both yourself and the other party initial any changes made to the contract.
If you enter into a contract with a party located in another state, it’s possible that variations in state laws will provide the basis for a contract dispute. Such disputes can be time-consuming and expensive. If you suspect that such variation may affect the terms of your agreement, make sure to stipulate in your contract which laws will govern.
Quick Tips Before You Sign
Before you sign on the dotted line, consider the following:
- Have you read every word, including the fine print?
- Does the contract reflect the term and conditions that were negotiated?
- Have you sought legal advice if anything on the contract is unclear?
- Are there any blank spaces on the contract? Cross them out if there is nothing left to add. This way they cannot be altered later.
The Most Important Tip of All
The most important tip of all is short and simple. There is no substitute for full and proper legal consultation. If you are unsure of any detail regarding a contractual agreement you’d like to enter into, consultation with an experienced lawyer will ensure your peace of mind and legal protection.