Anytime you enter into a business relationship, you should make sure the parameters of that relationship are clearly outlined in a business contract. These contracts are far more than just a formality — an effective contract ensures both parties fully understand the terms of their working relationship, and it also offers guidance on how to proceed if disputes or other unforeseen circumstances arise. Here’s a look at the basic elements needed for an effective business contract.
Before you draw up a contract, make sure you understand everything you need to include. A business lawyer can be a valuable resource when it comes to offering advice. You also may choose to hire a business attorney to draft a contract that meets your needs or to review a contract you’ve been asked to sign.
1. Get It in Writing
Written contracts aren’t always legally required. Oral contracts are enforceable, but because they’re notoriously difficult to prove, having a contract in writing is almost always preferable. When you take the time to create a written contract, you can ensure all key components are clearly outlined and no confusion exists. However, some agreements — like contracts for the sale of real estate, the sale of goods over $500, and contracts that cannot be fulfilled within a year — must legally be in writing. In any case, a written contract is always the safest way to preserve the contracting party’s rights.
2. Identify All Contracting Parties
This may sound obvious, but any contract should explicitly identify the involved parties. If a business is solely responsible for the contract, the contract should clearly specify that. This can become an issue when one party is a business, but an individual signs on behalf of the business. In this situation, the contract should state the full name of the business and clarify that the person is signing on behalf of the business and not as an individual. If your contract doesn’t clearly identify all parties involved, it may be unenforceable in the event of a dispute.
3. Keep Language Clear
To someone without a legal background, the language used in a contract might seem confusing. However, the language you typically see in contracts serves a specific purpose: it spells out all terms explicitly and unambiguously. If someone challenges your contract down the line, the last thing you want is for there to be room for interpretation.
However, including clear and specific “legal” language doesn’t mean you shouldn’t take steps to make your contract more readable for the average person. Short and clear sentences as well as descriptive paragraph headings will make the contract easier to understand and will avoid vagueness.
Need help making sure you use the right language in your business contract? Call Weisblatt Law Firm today at (713) 666-1981.
4. Make Sure All Terms and Conditions Are Stated Clearly
Terms and Conditions Are the Heart of Your Contract
The material terms of a contract are arguably its most important elements. After all, the purpose of a contract is to detail a business relationship. These terms and conditions must always be explicitly stated — never implied. The exact types of terms and conditions you need will depend on the type of contract, but these are some general examples:
- What services will be provided
- Payment terms and due dates
- Limits on liability
- Delivery schedules
- Performance expectations
- Situations when the contract may be terminated
- Consequences of breach of contract for each party.
Many business relationships are complex, and their contracts may require an extensive list of terms and conditions. A business lawyer will evaluate your situation and help you make sure you include all necessary provisions.
5. Specify Which State’s Laws Apply
A good business contract will also specify which state’s laws will apply to the contract. Contract law can vary from state to state. If the parties are in different states and the contract doesn’t say which state’s laws apply, even determining where litigation should begin can be a time-consuming, expensive challenge. Specifying which state’s laws apply to a contract might seem like a minor detail, but it can save you untold amounts of time and money in the event of a dispute.
6. Identify Alternative Means of Dispute Resolution if Needed
Your contract should also include any required alternative methods of dispute resolution, such as arbitration, and any conditions under which the contract may be terminated. No matter how thorough your contract is, there’s always the potential for a dispute. If you’ve been in the business world for any length of time, you know that litigation can be extremely expensive. To save both parties time and money in the event of a dispute, many contracts require another process (like mediation or arbitration) when issues arise.
If you aren’t already familiar with various dispute resolution processes, choosing the right one for your contract can be difficult. A business lawyer can help you understand your options and can recommend a method for your situation.
7. Include Confidentiality/Non-Disclosure Clauses if Needed
Not every business contract requires confidentiality, but many do. If either party needs to guard proprietary information, a business attorney can help you determine what confidentiality provisions to include. They also can help you choose appropriate consequences for violating those provisions.
8. Make Sure All Parties Sign
A contract goes into effect only when all parties have signed. And since any party needing to enforce the contract must be able to prove it’s signed, every contracting party should keep a signed copy for their records. It’s also important to note that if the contract needs to be amended after signing, both parties must sign the amendments in order for them to be enforceable.
Contact A Houston Business Contract Lawyer Today
Experienced Guidance and Business Representation When You Need It Most
To best ensure you have a valid and favorable contract, you should have every contract reviewed by an experienced Houston business contract attorney.
Don’t leave your important contract details up to chance. Call Weisblatt Law Firm today at (713) 666-1981 for help creating strong business contracts.
Attorney Andrew Weisblatt
Mr. Weisblatt has practiced continuously since becoming licensed in 1992 and has represented businesses ranging in size from one person start-up ventures to multi-national corporations employing hundreds of people in multiple countries. From 2005 through 2009 Mr. Weisblatt was in-house counsel and chief operating officer of a multi-national corporation in the steel products industry. That in-house position provided valuable insight into how businesses work and what they actually need from their lawyers – both in-house and outside counsel. Attorney Bio
