Contract disputes are a common problem for businesses. They can occur between employers and employees or between different companies. Frequently, it is between a business and an independent contractor.
As a small-business owner, you likely utilize the services of independent contractors to get work done that you cannot do. You can lower the risk of contract breaches and litigation by ensuring the agreement you make has these three traits.
1. Clarity
Most issues stem from ambiguity or confusion over the terms of the agreement. You must be specific and detailed in defining the roles and expectations of each party. Being clear does not mean you have to be wordy or use complex legal language. In fact, the simpler it is, the lower the chances of misinterpretation. Make sure everyone involved understands and agrees to the terms before signing.
2. Thoroughness
The responsibilities are not the only aspects your business contract should address. It also needs to include the following information:
- Compensation: How will you determine the amount of payment, and when is payment due?
- Breaches: What happens if one of the parties does not complete its duties?
- Disputes: Will you use mediation, arbitration or litigation to settle conflict?
- Amendment process: How will you modify the contract if needed, and what terms are eligible for modification?
- Termination requirements: What causes the contract to end?
The more areas you cover, the stronger your agreement will be.
3. Validity
A contract is only effective if it is legally binding. Always create contracts in writing, even if the law does not require you to for that particular interaction. Have a business law attorney help you word the terms and review drafts to ensure the document complies with federal and state laws. A lawyer can also look for problematic areas and help you rectify them to make the contract clearer and stronger. Finally, all parties must sign the contract and include their job titles and contact information.
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