How to Write a Business Contract
When you enter into a contractual business relationship with a partner, you face certain challenges. You should sign a contract only after you have carefully considered all the advantages and disadvantages it entails. It is not recommended to fall into the trap and enter into an agreement with full faith in the other party.
Experts do not recommend entering into a deal blindly, even with family members. Business contracts should protect your personal assets and business interests and only when you are fully informed, you should decide whether or not to sign any document. There are many details to consider before signing a business contract.
Basic Recommendations for Signing a Contract
Before such an important process, make sure to pay attention to the basic recommendations below:
- Clear legal language. Don’t be afraid to make sure that a business contract is written in understandable legal language. The best contracts, especially those involving small businesses, should be written in plain and simple language so that both parties know and understand the agreements they are signing. Make sure that the terms you stipulate are consistent with the fact that the other party will not violate them. Keep in mind that some agreements and terms have certain meanings in the law. You can use the simplest way to write a contract. To do this, you need to number each paragraph and incorporate it into the appropriate topic. The contract will be divided into parts for easier reading.
- Details. In drafting the contract, it is very important to pay attention to making sure that the rights and obligations are stated as clearly and concisely as possible. You should not use general phrases. Pay attention only to specifics, especially if it involves dates and a certain amount of money. Never rely on verbal agreements.
- Provide payment details. When drafting a contract, be sure to include settlement terms and payment details. If you want to pay a certain amount in advance or distribute it into separate payments, be sure to clearly indicate each point. There are many ways to enter into a contract. For example, you can deposit a certain amount of money before it starts, and pay the rest after the transaction is completed. The relevant clause should state the information as accurately as possible for the purposes of a legally certified document.
- Confidentiality. When you enter into a business contract with partners, they have access to your confidential information and understand how you conduct business. You may inadvertently disclose information and access to trade secrets. To be protected in such an event, it is important to include a contract clause that commits the other party not to disclose business information and data that is confidential.
- Reasons for terminating a contract. Basically, contracts have a definite period of validity. When one party fails to honor the agreement or omits payments, you need a clause that makes it easy to terminate the contract. It is best to have a mutual agreement to terminate the contract. This is necessary so that the other party doesn’t have a reason that will hinder such a process.
- Remedies. If you think you will pursue them in connection with the contract you signed, you can put a clause in the contract that awards the compensation of attorney’s fees to the prevailing party. If this clause is not included in the contract, then each party will pay separately for the services of lawyers.
- Legal Services. When you draft a business contract it should primarily protect your interests but also fulfill a necessary purpose for business success. You should familiarize yourself with the legal terms and procedures for drafting a contract. This is best handled by a lawyer before the contract becomes enforceable.
You can use various templates to draw up a contract. For example, Pandadoc is a software tool with a library that has a large selection of templates.
Types of Business Contacts
Business contracts come in many forms. Although they fall into broad categories, it takes a lot of time to create the right document. The categories of business contracts can include purchase and sale agreements, leases, service agreements, and many others. If you don’t understand what type of business contract to use given your activities, make sure to consult your local legislation. Let’s look at the main types of business contracts:
- Service contract. It is signed between a company and an independent contractor. There are different types of companies that use this type of contract. There may be different types of service contracts among them, for example, for services of technicians, web designers, bookkeepers, and accountants. These types of business contracts are unique because they do not provide a specific type of sale.
- Sales Contracts. These are common types of contracts that are made between a buyer and a seller. The contract sets out the terms of payment.
- Partnership Agreement. This type of transaction is used between business partners. They describe all the terms in detail. Such a contract is most often concluded between business owners involving technology and insurance companies, as well as construction companies.
- Joint venture contract. These joint venture contracts are created between two parties who work together on a particular project. These can be companies that manufacture mobile devices and other products.
It is highly recommended to consult a lawyer in order to properly draft and sign a business contract. This will help avoid negative consequences as a result of the transaction.