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6 Tips for Creating the Best Possible Business Contract

18 May 2020 by Richard Ramirez

Business lawyers often help companies deal with messy contracts that their clients signed without counsel. The first thing they'd tell you to improve the situation is to have an attorney review the language of anything you're thinking about signing. Beyond the obvious, though, there are several other things you can do to make sure your contracts are the best possible agreements. 

1. Clearly Identify the Parties to the Contract

It's very hard to enforce an agreement if a reasonable person would struggle to determine who's involved. There is no such thing as being overly specific about who the parties to a contract are. Include printed versions of the names of businesses involved, and you should also include any additional information, such as DBAs. Print out the names of all signatories, too.

2. Save the Legalese

Leave the hardcore legalese to the business lawyers. If your attorney says something extremely legalistic needs to be in the contract, that's fine. Otherwise, just spell everything out clearly in compact sentences using the sort of common verbiage a reasonable person from your industry would use. Your business lawyer can add any necessary formalities later. 

3. Verify the Authorities of Signatories

If someone is signing a contract, you should verify that they're in a position to do so. Don't let a random member of a company convince you they have the necessary power to sign. If they're not comfortable with you checking their credentials with their company, then you don't need to be doing business with them.

4. Termination and Sunsetting

There should always be clear conditions for ending a contract. For example, if both parties are willing to arrange a payment to kill the deal, include that. Also, include a sunset provision that ends the contract on a certain date. You don't want to be tied to an agreement that might age poorly. For example, the pricing structure in a deal may get massively skewed by inflation. 

5. Penalties

Failure to deliver on the contract should contain clear penalties tied to specific dates. Include a mechanism for an aggrieved party to seek enforcement through the payment of defined penalties.

6. Dispute Resolution

A mechanism should be included in every contract to resolve disputes. Binding arbitration is a preferred tool for business lawyers. These provisions should also clearly state where the arbitration will take place, if necessary, and under the laws of what state.

Learn more about drafting good contracts by working with business lawyers. 

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