3 mistakes you must avoid when entering into a contract

As a business owner, you will likely be party to numerous contracts with employees, independent contractors, vendors, customers and landlords. Needless to say, it's important that these contracts protect your business, minimize potential disputes and maximize profits.

This is why it is crucial to work with an attorney to ensure the contracts are fair, enforceable and necessary. Failure to secure legal guidance can facilitate unwise decisions and missteps that can have costly consequences, including those we discuss below.

  1. Agreeing to vague terms and conditions. Leaving anything in a contract unclear can mean leaving yourself vulnerable to misinterpretation. Even if you are sure both parties agree to certain terms or definitions, be sure that you are clear about these matters in the actual contract. Over time, memory fades and opinions change, so memorializing the terms of an agreement in a favorable and enforceable manner is important.
  2. Failing to get the agreement in writing. Verbal (non-written) contracts may seem sufficient in some cases. However, they can be less reliable than written contracts and more often than not evolve into a "he-said, she-said" dispute that may ultimately be difficult to enforce. As such, if you are unsure of whether to put an agreement in writing, it can be prudent to err on the side of caution and get it in writing.
  3. Including unenforceable clauses. This is a risk people run when they simply copy something they see online or use a template that they may not understand. There are numerous laws and regulations that vary between states, industries and companies. For instance, in California courts generally do not recognize non-compete clauses. As such, you should be sure your contract is specific to your situation and includes only enforceable clauses.

These missteps can lead to serious contract disputes that put a professional relationship in jeopardy. They can also lead to repercussions like fines, damages and contract cancellation which can prove to be quite costly - especially for a small business.

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