Top 10 Things Business Owners Need to Know About Entering Into Business Contracts
Litigation may be the only recourse for some business owners, as it often results when someone enters into a contract without fully examining what they are signing. At Tony M. May P.C., we see all types of businesses dealing with a variety of issues stemming from poorly written contracts, to those that signed contracts without actually understanding what they agreed to. If you are in the process of entering into a business contract, here are the top ten things you need to know beforehand to help protect you and your assets:
- All business contracts should be in writing.
Oral agreements can be binding, but they are difficult to enforce in court. A written agreement is less risky and it clearly defines each party’s rights and obligations.
- Define each party’s rights and obligations.
Defining the rights and obligations of both parties eliminates confusion, and makes it easier to plead your case in court as it has been clearly defined in the contract.
- Use clear language.
Use clear language and terminology that you understand, so that you will be able to clearly determine your rights and obligations under the contract. Create short, clear sentences, with numbered paragraph headings to show a reader what is in the contract.
- Identify each party correctly.
The contract should identify the accurate legal names of the parties involved. This is so they can determine their obligations to be performed under the contract, which includes using the full legal names of the corporations and/or LLCs that are parties to the contract.
- Include clear definitions of rights and obligations.
The contract document must include all of the rights and obligations for each party member in the contract. If you later discover there are additional items that should have been included, the parties should work together to include an amendment or addendum to the contract.
- Specify payment obligations.
The party’s obligations regarding payments should be defined by both the amount, and when each payment is due.
- Discuss circumstances for termination of the contract.
The Parties should discuss, and if possible, agree on any conditions that would allow a party to terminate the contract. These discussions should list any penalties for termination of the contract, should it be predetermined.
- Discuss dispute resolution.
Agree on dispute resolution measures, as some business owners prefer arbitration or mediation rather than going to court. In some cases, it is less time consuming, and less expensive.
- Understand state law requirements pertaining to disputes.
The Parties should also have a paragraph regarding which state law will govern the interpretation of the contract, as well as which jurisdiction/court should hear the matter if a dispute arises.
- Consult with a lawyer.
Although not mandatory, it is usually a good idea to have a lawyer involved with the drafting of business contracts to make sure that all appropriate issues are addressed and that the parties understand the scope of the contract.
Please know that Tony M. May P.C.’s attorneys have many years of experience drafting all kinds of business contracts, and we regularly assist our clients with both the formation, and negotiation of those business contracts. For more information about business contracts, contact our Las Vegas law firm today at: (702) 388-0404!