Examples of Mistakes in Business Contracts

What Makes a Contract Null and Void? These Mistakes Do.

The contract negotiation process is an excellent move for starting a business. This means you are officially in business. However, a contract also means you should be keen on your actions or face dire consequences.

A contract constructed in the wrong way can make all efforts to grow the enterprise futile. You should make sure this is not the case as you draft yours. This article will discuss some top mistakes people do when drafting contracts.

Companies should use contract management software to ensure the contract turns fine. 

  1. Lack of a Contract

Promises are noble things. They mean that someone will do something and not expect anything in return. However, it would help if you had a contract as the first thing before your business starts running. Remember, the law enforces contracts and not promises.

It is possible to have a different mindset after making a promise. However, contracts are followed to the latter. It is hard to open a business. Many a time, you will find yourself asking why you opened it in the first place.

It is advisable first to ensure the business is protected in case any person leaves. It would help if you also trusted your contractors and vendors. A well-elaborated contract will prepare you for uncertainties along the way.

It is advisable to have a contract before getting into any deal. Please consider this even when trading with people you trust. This is because anything can happen. Remember, the typical human has a faulty memory. This means all parties might forget the terms of their agreement.

  • Failure to Include an Assignation Clause

There are always chances that a giant company might buy yours even if you are successful. This might be a good move because you will have improved resources and talent.

You could face a business buyout suppose you did not have an assignation clause in the contract.

An assignation clause acts as a guideline to anybody who desires to buy your enterprise. It states that you should keep your contracts suppose another party buys the company.

  • Failure to Acknowledge Termination Clauses and Breaches

The contract must entail details of what should happen, suppose one party fails to meet the terms. The contract should also state what will happen to the party that breached these terms.

Will the contract let the other party leave after a breach? What is the punishment for every violation? These are a few terms that should be in agreement. People also fail to put termination clauses in contracts.

This clause makes way for the right party to leave the contract. These people fail to include a termination clause because of the fear of losing their clients. However, it is a vital part of a contract because it keeps you free from expensive litigations.

  • Use of Pre-Made Forms

These are some pre-made contracts available online. Even though these contracts seem cheap and open, it is advisable to avoid them. Here are some reasons why you should not use a pre-made form;

  • This form might lack focus on all business laws. It should have specific relevancy in your state.
  • This form might use ambiguous language. You should avoid it if the language looks unclear.
  • Pre-made forms might skip some essential details. An example of more information that is lacking in these forms is the termination clause.

It would help if you had an expert go through any form you get online before using it for a contract. An expert will notice any defects and help to correct them.

  • Failure to Address Disputes When they Happen

Disputes occur mainly in businesses. A contract guides you on how to deal with a conflict as it comes. There might be an option that requires both parties to solve the dispute outside the court.

It might also suggest mediation as a way to stop this conflict. It would help if an attorney went through the contract to keep it free from standard mistakes.

It is also advisable to tell the attorney to draft the contract on your behalf. You can get all these services from an experienced attorney.

  • Using the Wrong Venue

It is essential to choose a method to use in case things do not go as planned. It will help to know that the contract should also state where the issue will be resolved. This should not be a complex task. You should pick the city you live in as the venue.

It will also help to use virtual mediation if you stay far from the other party.

Final Thoughts

A contract is an essential part of every business. It states what should happen if one of the involved parties breaks the agreement. You can use the above information to know what to put in your contract.

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