A business contract is an agreement between private parties that is legally enforceable and made to provide a product or service. Business is developed with relationships and connections that often turn sour, which is why bulletproof business contracts are essential for maintaining a successful business or client relationship. In a world where contract disputes are all too often, the inclusion of certain clauses in business contracts will greatly reduce the risk of company lawsuits, misunderstandings and also provide legal rights that a company might otherwise have not possessed.
Seven Tips on How to Draft Bulletproof Business Contracts
- To start, consistently maintain an updated contract of any sort, even with one’s most trusted partners or clients; this will provide a business with the necessary protection.
- Establish everything in writing and include an integration clause. Oral business contracts are notoriously difficult to enforce in court. If a business enters an agreement with another business or an individual, that agreement should be reduced into a signed writing. Contract law states that written agreements that include an integration clause (meaning, “this writing represents the entire agreement between the parties”) are interpreted according to drafters terms, and no outside evidence is admissible. For example, if one party puts forth the argument that a business contract’s terms have changed based on a phone call, a court will not consider that phone call as evidence, as stated in the LOC, “Changes in the terms and conditions of this contract may be made only by written agreement of the parties.” Furthermore, putting an agreement in writing makes sure the parties know what they are agreeing to.
- Use clear and concise language. This may seem like a no-brainer, but many contracts are filled with obsolete fluff language. A written contract should contain no ambiguities, and the best way to start is with straightforward wording.
- Include every term agreed upon. As discussed in tip two, an integrated written contract will be read as written by courts. Contracts should include each and every item to which the parties agreed. Some of these agreements include, for example, terms of payment and delivery, including dates, type of delivery, place of delivery, type of payment, terms of installments, interest, and any consequence if a party fails to deliver or fails to pay. Leaving something out could lead to trouble if an agreement is breached.
- Include a choice of law provision. Each contract should contain a choice of law provision that states under what jurisdiction the parties can sue if a breach occurs, especially if the parties are in different jurisdictions.
- Properly identify the parties and ensure the correct individuals are signing. This tip is critical because many business entities have multiple subsidiaries, or “doing business as” names, thus requiring business contract drafters to ensure they have identified the correct parties to the contract and that the names are used correctly. For example, there is a difference between Johnson Corp. and Johnson, LLC, and if an agreement is entered with one entity, but the contract names the other, the contract may be unenforceable. Moreover, guarantee that the person signing has the authority to contract on behalf of the company. Lawsuits will get tangled if the signee on behalf of the corporation was not authorized to do so.
- Last, but not least, a contract should always include attorney’s fees. An attorney’s fees provision can be included in any type of contract, from lease agreements to consulting contracts. The prevailing party shall have the right to collect from the other party its reasonable costs and necessary disbursements and attorney’s fees incurred in enforcing an agreement. “Costs” refer to filing fees, fees for serving the summons, complaints, and other court papers, fees to pay a court reporter to transcribe depositions (pretrial interviews of witnesses), in-court testimony, and, if a jury is involved, to pay the daily stipend of jurors. However, with the inclusion of an attorney’s fees clause, the losing party is held responsible for both parties’ court costs.
The greatest way to assure that your business contract is bulletproof, be sure to contact the experienced corporate attorneys at Valencia & Torres Law.