Contracts are a vital part of commercial transactions. They are legal documents binding you and another party to certain obligations. Get them right and things run smoothly, get them wrong and it could cost you and your business dearly and you could end up in Court trying to resolve the dispute.
Here we look at the most common contract mistakes that put businesses at risk and how to get it right first time.
You need more than a handshake
Never, ever do business over a handshake or a verbal agreement. It is not a matter of trust (in most cases) but understanding expectation and for that and for future referenceit’s vital you get everything agreed in writing. While most contracts are never disputed and far fewer end up in Court, a watertight contract could protect you from any potential liability for loss which, if substantial, could put you out of business completely. The chances are, your contract will remain in a file or in your bottom drawer – but it’s there should you need it and the care you will have taken over the details will be the basis of good understanding
Do your homework
One of the most fundamental mistakes made by businesses is failing to do their research properly. While many firms look into the financial aspects of the deal, many fail to get to grips with their potential business associates. You need to investigate exactly who you are entering into an agreement with. Get the facts, the figures, costs, due dates, obligations, responsibilities and consider the ‘what ifs’.
Bespoke is best
Some business owners make the mistake of using a standard format for their contracts or borrowing templates from other businesses. No two businesses and no two deals are the same and a ‘blanket’ one size fits all approach can lead to trouble and costly Court appearances if unforeseen situations arise or the full legal implications of the terms of the contract are misunderstood. This applies even for big companies but often they call the shots and can overcome a bit of poor drafting – for small businesses that cannot afford to litigate, getting it right makes all the difference.
Focus on the detail
Contracts need to be as specific as possible to avoid any disputes later on – especially when it comes to payment terms and conditions. What are your exact payment terms? And if that is a commission payment what exactly is it calculated on? What happens if payments are not made on time? You must spell out everything in simple, straightforward language to avoid future problems. And never assume anything.
Take your time
When time is against you and you’re under pressure, it can be tempting to make last minute alterations or rush to add in further details. This is when errors are most likely to creep into the contract and should be avoided at all costs. Take your time to get the contract details right first time. If you do have to make short notice changes, think very carefully about what you are including and how it will be interpreted by other parties.
Specialist commercial contract solicitors
It might be tempting to go it alone and draft your own commercial contracts but it’s vital you get expert legal advice. Even if you do the initial draft, a commercial solicitor should always review the final document. It’s good practice to let the other party to the contract know that your solicitor is involved in drawing up the contract and you can suggest they do the same. It is always better to err on the side of caution than to count the cost at a later date.
At Gregg Latchams we understand the challenges you’re facing as a business owner. Spending time and money on contracts might not feel like a priority, but it’s a safety net you can’t afford to be without.
And if you are worried about a contract don’t hesitate to act or you may lose rights to take action later.
Speak to a specialist commercial contracts solicitor today, call 0117 906 9400 or email firstname.lastname@example.org