While running a small business, you have several business relationships requiring you to enter into contractual obligations. Examples of business contracts include those for employment, consulting, distributors, confidentiality, and sales representatives. Before getting into a business contract, you must meet with the other party and discuss the contract details. The contract is legally binding if it has an offer, an acceptance, a consideration, and an intent to create a legal relationship.
Why You Need a Contract To Run and Protect Your Business
Business contracts are vital in any business relationship because they help establish systems and policies to govern legal enforcement and procedures. The agreement helps define what's expected from the parties when disputes develop. A business contract protects both parties by setting a timeline for every milestone, stating terms relating to failed obligations, and locking in financial agreements.
How To Create a Solid Business Contract
When creating a business contract, you should have relevant information before starting the negotiations. Identify the parties correctly, write the contract in the simplest form possible, and spell out the rights and obligations of every party in detail. Finally, agree on dispute resolution procedures, incorporate a nondisclosure clause — if appropriate — and note the contract expiration date. Prior to finalizing and signing a contract, have a professional lawyer review your contract to ensure the contract is complete, protects your company's interests, and is legally binding.
How To Negotiate a Contract
Contract negotiation involves two parties discussing the terms of a proposed written agreement. When negotiating a contract:
Start by creating a draft
Prioritize the key points
Avoid using personal phrases, such as ‘I think’
Focus on business facts
Ensure you're dealing with the right person within the company
Ask questions, and understand your counterpart's motives
Do thorough research
Control your emotions to avoid complicating the process
Take time before, during, and after negotiations to ensure all salient points are included in the contract
Tools Used To Present, Edit, and Modify Contracts
Creating, negotiating, and managing business contracts can be time-consuming and prone to data entry errors, hence the need to use contract tools. These contract tools, which include PandaDoc, Concord, Agiloft, and Outlaw, also help lawyers navigate and edit documents faster and accurately. The agreement is correctly read and vetted with a contract tool, enabling you to complete your review efficiently and at a lower cost.
If you plan to utilize part of a previous business contract in your new contract, it’s simple to use a tool to extract PDF pages to pull information from the prior contract. Select the pages you intend to use, and create a new PDF document for the new contract.
The Bottom Line
Business contracts help you avoid potential contract conflicts, build better commercial agreements, avoid misinterpretation of the accords, and protect intellectual and physical property. A contract can also determine how successful your small business will be. If you plan to get into any business relationship, consider joining your local chamber of commerce to network with the business community and learn about running a business.
This Hot Deal is promoted by Hoover Area Chamber of Commerce.