Growing companies have many tools at their disposal. Contracts are one of those tools and mastering their use is another competitive advantage that will pay dividends in the long run. Here are our best practices for using contracts like a savvy pro:
1.Ensure that the contract is enforceable
· Parties must be capable of contracting.
· Parties must consent to the agreement.
· Contract must have a valid legal object.
· Contract must be supported by sufficient consideration (not necessarily money).
2.Always have it in writing
· Oral contracts are sometimes unenforceable by their nature.
· Oral contracts are difficult to prove and costly to enforce.
3.Avoid using agreements found on the internet
· Contracts are not one size fits all – they need to be customized, as most are for specific business situations, facts, and jurisdictions.
4.Read and understand your contracts
· If you are uncertain, have them reviewed!
· “I did not know what was in it” is no excuse under the law.
5.Have clear deliverables and scope so that all parties are on the same page so there is little left to chance and interpretation
· This will help avoid “scope creep”, in a services contract, for example, where the other party expands the scope of services they want over time for the agreed upon payment terms.
6.Using contracts with other parties helps weed out the bad apples
· If they are not comfortable committing to terms in writing and being held accountable then that could be a red flag.
· Working out a contract can also give you an insight into how easy or perhaps frustrating they are to work with.
7.Make sure the contract covers all key aspects/responsibilities specific to the situation
· If important sections are left out, then you could be left in no man’s land with no agreement as to what is to happen between the parties in certain situations.
8.Don’t be bullied by take it or leave it ultimatums
· If you are uncomfortable with the terms of a contract, and the other party will not compromise, then it may be best to walk away than to sign a contract that may keep you up at night for its duration.
9.Just because it looks like boilerplate does not mean it is not important – it can hurt you and your business
· Sometimes key provisions can be snuck into the most unexpected places of the contract.
10.Track your contracts and know when they expire so you can take necessary and timely actions
· You may need to re-execute another contract for your benefit and protection or maybe it is time to explore options with new parties to fill that need.
11.Re-evaluate your contracts when a material change occurs on your end
12.Safeguard your contracts
· Store executed physical and electronic copies in a few different safe places so you will always have access to a copy in the event one is lost or destroyed.
13.Know who you are contracting with
· Contracts are important to protect you, AND it is important that the other party will honor and respect them. Make sure they are someone you want to do business with.
If you have any questions about contracts or would like some assistance in drafting or negotiating a contract, please contact Optima Law Group at 858-964-4697 or email@example.com and we would be happy to assist however we can.