When you’re in business you deal with contracts regularly. They ensure you have what you need when you need it, whether what you need is premises to work in, raw materials to turn into a product or staff with the skills to drive your business forward.
Unfortunately, because they are legally binding documents, a mistake can have serious consequences for your business. It’s always worth getting an expert in contract law to check over your contracts for you, to ensure you’re not binding yourself to an agreement that could harm you in future. This is doubly important when you are drafting a contract: if you get it wrong, you could end up liable to pay without actually receiving the service you need.
Here are some of the worst mistakes you can make with business contracts, to make sure you don’t make them.
Breaches and Terminations
It’s important to make sure there is a way out of a contract that isn’t working for you. If you simply stop supplying the service (or, if you’re on the other side of the table, stop paying), you’ll find yourself liable for a large penalties, or even in the court room.
When you’re getting ready to sign a contact, make sure you agree on certain things that will constitute a breach in the contract – actions that mean the the other side can terminate the contract – and grounds for termination. This means if you find you are unable to supply what you are contracted to, you have an option to back out legally, maintaining your relationship with your partner so the possibility exists to work again in the future.
There is nothing more important that reading a contract. If you’re being rushed into signing by someone selling a service, this is all the more reason to read carefully. You may find that you are signing away more rights to your ideas than you were aware of, or committing yourself to providing a bankrupting level of service without due reward.
Remember, there is no such thing as a standard contract and don’t allow yourself to be convinced otherwise.
Defining Terms and Parties
It’s important to define who the parties signing the contract are. Make sure, for example, that you are signing the contract on behalf of your business, rather than personally. This means you are due to pay from your business accounts, rather than personally.
Kara Perez is the original founder of From Frugal To Free. She is a money expert, speaker and founder of Bravely Go, a feminist financial education company. Her work has been featured on NPR, Business Insider, Forbes, and Elite Daily.