From exchanging goods and services to leasing commercial real estate, the success or failure of your business ventures may rest on the strength of your contracts. In the U.S., the Uniform Commercial Code ensures equitable enforcement of contracts from state to state.
The first rule of contract law is to get all the details in writing. While oral agreements may be convenient, they can also be very difficult to enforce if you end up having a dispute with another party.
However, not all contracts provide equal protection. Here are three key considerations when drafting or reviewing a business agreement.
1. Clearly identify parties
Failing to properly identify the legal parties involved is one of the most common contractual pitfalls. In your written agreement, make sure to use the full legal name of both your own company and the business you are contracting with.
2. Spell out payment terms
It is also essential to specify exactly how, when and under what conditions payments are due. Make sure your contract spells out specific dates for payment as well as what type of payments you will exchange, whether via personal check, wire transfer, business charge card or cash. If you prefer installments or want to defer payments, make sure to detail your expectations.
3. Establish rules for termination
When it comes to business, it is important to anticipate the unexpected. To avoid potentially costly litigation later, it may be a good idea to detail the circumstances under which one or both parties can terminate the contract without legal repercussions.
Whether you are entering a minor or major business contract, it pays to get the details right the first time. While certain expectations may seem obvious, unless it is in writing, it may not be enforceable should a dispute arise down the road.