Avoiding the Top Rookie Mistakes in Business Contracts
On behalf of Brian Chenoweth
Have you recently decided to open up your own company? Is the time ripe for starting the business venture you’ve been thinking about for the past five years? Are you getting ready to take over the family business?
A number of Oregon businesses will fail in the coming year. If you are – or soon to be – a new business owner, there are a number of important steps you must take to get started right and to avoid legal disputes and potential lawsuits.
Seven questions to ask before signing on the dotted line
Every business transaction involves a written or unwritten agreement. Your agreements can make or break your business. Before you shake hands or sign on the dotted line, ask yourself these questions:
- Do I need a written contract? The answer to this question is always yes. Failing to put an agreement in writing puts you, your business, and your assets at risk. Even if you are certain that nothing can go wrong, you would hate to find out otherwise.
- What can go wrong? Spend some time thinking about issues that may arise during the course of negotiating the contract, and establish a plan – in writing – for how those issues will be addressed and resolved.
- What’s my “out?” Your and the other party’s options for terminating an agreement are as important as the terms you are agreeing to in the first place. You may need to be able to get out an agreement when your circumstances change. Address what will and will not allow the other party to terminate your contact, and establish penalties if appropriate in the event of a breach.
- When does this end? All agreements should have a termination date, and you may wish to make your agreement assignable to another party, especially if you plan to sell your new business idea, product or service to another company.
- What are my responsibilities? You should understand every term in your contract as well as the obligations of each of the parties. Vague, confusing or misleading language and terms can quickly lead to contract disputes. Don’t ever rely on the other party’s oral statements regarding what a contract provision means, if it’s not clearly stated in the contract.
- Disputes are easy to resolve, right? Resolving one contract dispute can take up a lot of your time as well as cost your business tens of thousands of dollars. You may want to require both parties engage in settlement discussions or mediation before filing a lawsuit. You may want arbitration instead of an expensive trial. Does your contract allow you to recover your attorney fees and costs if you win?
- Is this contract binding? A poorly drafted agreement can bind you to obligations you cannot keep, expose you to unnecessary risks, or prevent you from making changes that are necessary for your business’ success.
Protect your business interests with the help of a contract lawyer
At any stage of the contract process – negotiating, disputing or terminating – an experienced business and commercial attorney from Chenoweth Law Group, P.C., will help protect your assets and business interests. Seek clarification if you have questions about the terms of an existing business contract or need assistance drafting an agreement.