Business owners negotiate deals and enter agreements daily. Unfortunately, many agreements are not always put in writing. When a large transaction is involved, such as buying real estate or merging companies, most business owners reach out for help negotiating and drafting the appropriate contracts. When the transactions are smaller, many business owners and managers too often rely on handshake deals.
What is a Business Contract?
Contracts are as boring as it gets – at least until your money is on the line. If your company does not put “routine” agreements in writing, then you are asking for complications in your business dealings.
Business contracts include any agreement between two or more people in which something of value is exchanged. Usually one person agrees to perform a service or deliver a good in exchange for valuable consideration, such as money. Some of the more prevalent business contracts in South Carolina include buy/ sell agreements, bill of sales agreements, contracts for services, employment and non-compete contracts, real estate transactions and lease agreements, licensing agreements, and loan agreements.
Why Not Sign a Contract?
There are many reasons people fail to get the terms of an agreement down on paper. Some people think it slows the pace of business or think it is unnecessary. Others think it is insulting to imply the other party may not do what they say. The truth is people make mistakes and from time to time misunderstand verbal agreements. Of course, there are also those people who are constantly trying to take advantage of others. Regardless of who is on the other side of a transaction, it is prudent to have him or her sign a contract. If it is awkward to ask the other party to sign a contract, you can always point the figure at company policy or your lawyer for wanting everything in writing.
It is surprising how many business owners enter into handshake deals and fail to put the terms of an agreement in writing. In Charleston, deals are made everyday without the proper contracts in place. For example, weddings and events are a large part of the local economy. Every event requires a plethora of service contracts and vendor agreements, but too often companies fail to put these basic business contracts in writing and end up in trouble.
Tips for Drafting Contracts
The most important consideration when drafting a business contract is making sure you understand the terms of the agreement. Contracts are pointless unless both parties understand who is agreeing to what. The following is a list of 12 Tips for Drafting Business Contracts.
- Understand the terms of the agreement.
- Put the agreement in writing.
- Make the agreement readable.
- Spell out payment and pricing details.
- Articulate the services or products to be rendered.
- Highlight when performance is expected.
- Communicate representations or warranties made about the services or products.
- Consider limitations on liability if the other party does not think the services or products meet expectations.
- Think about including a clause relieving you from breach if unforeseen circumstances arise.
- Include language defining how disputes will be resolved.
- Define how the contract will be terminated.
- Consider a confidentiality agreement.
People misunderstand terms of agreements or think they have communicated well everyday. Life happens and having well documented terms of an agreement down on paper helps everyone understand what is expected.