5 Key Terms Every Business Contract Should Have
This month, we turn our focus to business contracts and a few key terms that should always be included. It was tough for me to pick five of the “must have” terms since I tend to draft my client’s contracts tailored to their individual business goals. Take a peek at the list below to see if your business contracts address these topics. Spoiler alert: this is not an exhaustive list but it is a good starting point.
1. Duties and Due Dates– Simply put: who needs to do what by when. Every written agreement needs to clearly outline each person’s responsibilities. This promotes a transparent business relationship by laying out what you expect from each other. As a raving fan of transparency, I always try to include a timeline for when those things need to be done. That way it is super clear what everyone is getting in to when they sign their name on the dotted line, and if things go sour we have a specific section in the contract to point to when deadlines and obligations are not being met. You don’t want to have the most important terms of your transaction be part of a conversation instead of the written contract.
2. Termination– Is this contract supposed to last forever? Absolutely not. A strong contract has a start date, an end date and most importantly, a way to legally terminate the contract if the business relationship isn’t working. Not all business relationships work out and the termination clause gives you a way out if things go south without breaking the contract or having to wait until the contract expires. No need to be tied to something that doesn’t serve you or your business.
3. Entire Agreement– This clause is commonly overlooked. It confirms that the written contract is the whole enchilada (mmm… enchilada *ehm*). Meaning, that everything we have agreed to as part of the deal is inside the four corners of this signed, written contract. If there is any question as to what the deal is, the court isn’t going to look at your texts or emails to try to figure it out. The rational being, if you bothered to put the terms in a written contract you included ALL the terms and everything else that didn’t make the final cut, was just part of the negotiations and therefore, not binding. As stated in point one, write it in the contract if it’s important.
5. Attorney’s Fees– Speaking of court, if a legal proceeding is needed to resolve a contract issue, the “Attorney’s Fees” clause gives the winning party the right to have their legal fees paid by the losing party. It essentially discourages bringing a lawsuit that has no merit, otherwise you risk picking up not only your legal bill but also your counter part’s legal bill if you lose the case.
6. Choice of Law/Choice of Court – Staying with the theme of disputing a contract in court, it’s important to name which state’s laws will govern the agreement. The laws of each state are different and may interpret your contract in your favor or against you. You’ll also want to mention whereyou can bring a lawsuit. Do you really want to travel near or far to have access to the court system? Of course not, usually you’ll want to be in your home state and in your home town.
Stay with me here…
While contracts tend to be tricky, they are put in place to protect you and your business. These are just some of the clauses I include in contracts to make sure my client’s best interests are covered. Purchasing or downloading a boilerplate contract template probably won’t have the terms you actually need to give you protection and peace of mind in your transaction – which means you’ll probably haveto ask a court to step in (and spend more money). Protecting your business and investment and doing it right from the beginningwith a tailored contract leaves less to chance, reduces the risk of pricey court battles and adds security to your business transaction.