Your contracts determine what projects your company will complete and how much it pays to employ certain professionals. Business contracts are key to daily operations and ongoing success.
Although there are basic, boilerplate contracts that you could download from the internet, such documents will typically fall far short of what a good business contract could achieve for your company. Including the four elements below in each of your business contracts can go a long way toward maximizing how effective and protective your contracts are.
Your exact expectations
Whether you expect a delivery of supplies every few weeks from a vendor or expect new employees to meet certain metrics within a fixed amount of time, you need to be very transparent about what you expect from the other party. You should also be very clear about what you intend to provide for them. The more direct and thorough you are when outlining your basic contractual obligations to each other, the less likely you are to have a dispute later.
Conflict resolution rules
Speaking of disputes, issues might arise later such as allegations that one of you breached the contract. If you have to go to court, it will take months to resolve the disagreement and could both damage your reputation and cost thousands in court fees.
Including provisions in your contract that require alternative dispute resolution services, like arbitration or mediation, can be a wise decision. It will give you an opportunity to prevent the issue from snowballing out of control and can also minimize public awareness of business matters.
Timelines and pricing
Whether you expect to pay a certain amount for materials or you intend to pay a specific wage for labor, it is crucial that you give details of exactly how much money will exchange hands.
You also need to provide a timeline for your business arrangements. Employment contracts may last indefinitely, but you could still include bonuses to motivate workers to hit certain metrics or stay with the company for a certain amount of time. When hiring another company as a service provider, you may want to be clear about how long the arrangement will last or how long it will take to complete the work.
Penalties for non-compliance
Maybe you will assess a late fee if a customer does not make payments as agreed. Perhaps you will assess a cancellation fee if a business severs its relationship with your company without proper written notice. If you intend to impose any kind of penalties on the other party for their failure to follow through with the contract, you will need to outline those penalties clearly in writing if you hope to be able to enforce them later.
By being very specific about your expectations and providing ways to resolve issues that may arise, you can draft business contracts that other parties will be less likely to breach.