When you are in business you need to know how to make a business agreement. You will be entering into business contracts and buying and selling goods and services. Well drafted business contracts prevent disputes and misunderstandings and are essential if your business is to succeed. The following are some tips to get it right.
1. Remember the essentials for any legally binding contract-offer, acceptance and consideration. There must also be the intention to create a legal relationship.
2. Write down what is agreed. A contract does not have to be in writing but doing so avoids any dispute over what was agreed. Disputes are thereby avoided.
3. Use everyday easily understood language. There is no need for ‘legalese’. No need for a load of ‘hereinafters’ and ‘the first party’s’. Just write in clear, short sentences using numbered paragraphs with suitable headings.
4.Include the correct legal name of each party to the contract. Identify clearly who is to do what and that what they are obliged to do is fully set out.
5.Set out the payment obligations. You should specify who pays who, when and how the payments are to be made.
6.Make clear any fixed term for the contract or specify the circumstances under which the contract will come to an end.
7.Include a clause dealing with how any disputes will be resolved. This should be initially through mediation, arbitration or some informal dispute resolution process and resort to the courts should always be avoided.
8.Decide on the legal jurisdiction and law to govern the contractual relationship. This will usually be England and Wales.
9.Consider the need for a confidentiality clause if sensitive business information is likely to pass.
- Read every word carefully and then read again,
- Think through whether everything discussed and agreed is included and that nothing is included which had not been agreed,
- Ask yourself whether you fully understand all the obligations imposed and are satisfied that you can comply with what you are obliged to do,
- That there are no blank spaces in the contract and that any alterations will be initialed,
- Make sure you will have an original signed copy for your record.
11.Never allow yourself to be pressurised into signing a contract. Take your time to consider before signing.