Contracts are a regular part of doing business. A well-executed contract can protect the interests of all involved parties, while also setting up a framework for the handling of any issues that may arise. Conversely, a poorly executed contract can lead to disputes, which may be costly to remedy. Here are some common contract mistakes and how you can avoid them.
Playing fast & loose during the drafting phase
Even if you are a relatively laid back business owner, you must still take contract drafting seriously. Verbal contracts or those that are drafted between text messages and emails do not hold as much weight as a formally drafted contract. It can be difficult to prove the terms in court, which might lead to a judgment against you. While you can use less formal channels to discuss business issues, the decisions made therein should be used to create a binding contract, preferably with the assistance of an attorney.
Not considering your legal obligations
Along with including terms that are amenable to you and other parties, you must also make sure the contract adheres to state rules and regulations. Every state has its own laws regarding business contracts, and these rules can vary quite a bit. Failure to include the appropriate terms could lead to fines, refunds, and even end up with your business being shut down indefinitely.
Never revisiting your contract for updates
If your contract is meant to establish terms over the course of years, it must be revisited on a recurring basis. Changes in staffing, operations, finances, or other areas could directly impact the terms of your contract. If they are never re-negotiated and updated accordingly, you may be in for a rude awakening if an issue ever arises between you and another party.