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What should I know about creating strong business contracts?

On Behalf of | Sep 22, 2020 | Business formation

When you launch your own business, it’s an exciting and yet stressful time. Before you begin serving the needs of your clients or customers, you want to ensure you have done everything you can to protect your business, so it can succeed long-term. One of the most important ways to do this is by creating strong business contracts.

Understanding business contracts

A strong written business contract includes the following:

  • The correct full names of the parties involved: It shouldn’t be a big surprise that companies have lost lawsuits over the fact a business name wasn’t correctly listed in the contract. You want to ensure that if your contract is with your business and Total Asphalt LLC, both business names are written accurately in the contract.
  • The payment terms of the contract: You need to list who will be paid upon signing and execution of the contract and which party will pay for the services and goods covered by the contract.
  • The details of the contract: The contract’s details include which exact services the contract covers, if there are any materials costs that are part of the contract and when the project detailed in the contract will end.
  • How the contract will end: This includes detailing a process to deal with any problems that arise during contract completion. You might want to add language giving your company or a vendor the chance to remedy any problems before one party becomes in breach of the contract.
  • How you and the other party will resolve disputes: What will happen if you and the other party have a dispute you can’t resolve quickly? The contract can address if you will seek mediation or binding arbitration if that happens, to save time and money. You also want to specify which state you’ll resolve this dispute in (hopefully, California if you own and operate your business here).
  • How each party will protect private information: If you are working closely with a subcontractor or vendor, at some point, that company’s employees may gain private information about your own business. This may include a potential customer list or information on a proprietary design feature you will include in a new development. You want to protect that information, so your contract needs to specify how private information should be protected and what restitution will be involved if someone reveals said information.

No matter if your contract is for $10,000 in services or $1 million, you want to ensure your business doesn’t end up in a bitter dispute about the intricate details. This could end up costing you time and money that will ultimately hurt the success of your business. For this reason having a strong written contract, reviewed by a business law attorney, is so important.