Contracts are synonymous with business dealings to many people. Organizations need to have written arrangements with various other parties to operate efficiently. Businesses sign contracts with their employees and with service providers. They negotiate terms with vendors and landlords. They may even sign contracts with customers or clients.
The terms included in the contract can have a major impact on the company’s success and the ability to enforce the agreement later. Establishing thorough and enforceable contracts is important for controlling costs and keeping business operations predictable.
Not every contract successfully achieves the intent of the people who drafted the agreement. Small changes from one contract to the next can have a major impact on the validity of the agreement. How can business leaders work to better ensure that their contracts are as strong as possible?
By focusing on the details
The specific terms included in contracts should reflect the unique circumstances warranting the written agreement. Instead of using fill-in-the-blank documents found through a cursory internet search, it is typically better to have custom contracts created for each major transaction.
Using the same employment agreement for an executive as for a custodian may not properly protect the organization from liability or adequately clarify the expectations for those professionals. The details included in the contract may prove critical for a company’s protection if there is ever any conflict related to the agreement.
By including special terms
In addition to details about the agreement between the parties, contracts also need to include a variety of different protective clauses. For example, many contracts include severability clauses. These clauses help ensure that the rest of the agreement remains enforceable even if either party breaches certain aspects of the contract.
Employment contracts may include restrictive covenants to help the company avoid unfair competition in the future. Contracts with customers, clients, vendors or service providers may include penalty clauses related to contract non-performance or the failure to make payments on time.
There are a variety of different legal tactics that can enhance the strength of a contract and the protection extended to a business. Reviewing existing contracts and drafting new documents for critical upcoming transactions with a skilled legal team can help business leaders protect the organizations that they run. The creation of thorough and enforceable contracts is key for successful business operations.