Contracts may not be anyone’s favorite thing to deal with, but ironclad agreements serve as protection when doing business. However, many companies rush the process and leave terms unclear or missing.
Being careless with contracts can be costly, as in the example of a clerical error that led to a $231 million mistake. Business owners and managers should note three mistakes to avoid.
1. Relying on oral agreements
Having nothing in writing and relying on handshake deals may be as good as having no contract at all. In various cases, such agreements are not binding.
Oral agreements often lack clarity, making them difficult to enforce or interpret in a dispute. These deals can lead to confusion and distrust, making written contracts with multiple copies the better option.
2. Copying a standard agreement from the internet
While the web is an excellent resource, a person cannot receive the kind of legal advice necessary to create a contract that meets a unique situation. While a template may prove helpful in some circumstances, every contract must consider the current conditions and laws governing the transaction.
3. Not inserting a termination clause
Scenarios can arise where an entity needs to get out of the contract and terminate the relationship with minimal effort. Significant changes, such as the death of one of the parties, or a consequential commercial or economic event could make the agreement untenable. Providing such contingencies can safeguard a business’s existence and professional relationships.
Many other mistakes can occur when drafting a contract. Taking time to prepare and review documents carefully before signing can prevent unnecessary difficulties in the future.