On the surface, contracts are relatively simple. You agree to do something in exchange for something from another party. However, as a business owner you know that contracts can get complicated quickly. Poorly phrased contracts can lead to unwanted disputes.
Here are four steps that you can take to help limit your business’s exposure to disputed contracts and litigation.
1. Define the terms clearly
It might seem like stating the obvious, but ill-defined terms are a major source of contract disputes. You should know what your obligations are. The other party also needs to be aware of its expectations. Contract management and the discussion of terms and definitions before reaching an agreement can help spare everyone from unwanted breach of contract allegations.
2. Consider unexpected events
You know from experience that things do not always go as planned. Recent events have led to a lot of uncertainty. Including a force majeure clause in your contract can help protect your business interests.
You know how important contingency plans are to the smooth operation of your business. Your contracts should have contingency plans as well. However, it’s important to remember that your force majeure clause may have its own limits. You want to make sure that they are as flexible or specific as you intend.
3. Ensure all parties provide input
A one-sided contract is begging to end up in litigation. When all parties who are involved in the agreement provide input, every party receives protection and all parties stand to benefit. A mutually agreed upon set of expectations is much less likely to lead to a dispute.
4. Avoid agreements that raise questions of coercion or fraud
Like the above point, if a contract appears to be one-sided, it is much easier for one party to claim that they were coerced or induced to enter into the agreement through fraud. After all, you would not enter into an agreement that provides you with no benefit or protections.
In addition, a party should refrain from making false claims in a contract. False claims in a contract will almost always lead to a lawsuit for fraud.
Do not be lulled into complacency
The surface simplicity of contracts can be deceiving. Poorly drafted or negotiated contracts can be a legal minefield, especially if your business relies on a lot of form agreements. Your safest bet may be to review and negotiate the terms of your contract every time you enter into a new business agreement.