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3 important inclusions to create stronger business contracts

On Behalf of | Jan 23, 2023 | Business-Employment

From the first days that you start doing business, you may need to negotiate contracts with other parties. Landlords, suppliers and employees typically all require contracts when you start a professional relationship with them.

Ensuring that you include the right elements in your contracts will be key to protecting your business from future losses. Unclear, generic contracts do not offer much protection and may actually be the source of disagreements between you and the other party.

What kinds of details do you need to include in your business contracts to better protect your organization?

1. All of the specifics about your agreement

From compensation and severance packages when hiring a new employee to delivery dates and cancellation fees when arranging for a large order with a new client, there are many details that you need to explicitly outline in your business contracts. The cost of the goods or services rendered, the expectations of the recipient and the obligations that each party has to the other should all be part of your contract.

2. Clauses addressing non-performance

Contracts are only a record of the agreement that you have with the other party. The risk is always there for the other party to not follow through with their promises, such as failing to make payments to your company or to render services in full. Including provisions that allow you to sever a relationship or impose penalties based on the non-performance of the other party can help ensure everyone follows through with their obligations and limits the risk of a substantial breach later.

3. Clear rules for communication and contract changes

You need to provide a point of contact for the other party in case something goes wrong and also impose certain communication standards on them. For example, they may have a specific amount of time, such as two weeks, to report an issue with a product after noticing it.

Having clear rules in place regarding how the other party can communicate with you will be important, especially if something necessitates a change to your contract. Including terms for how you can negotiate a change to your original agreement will also be important.

Creating thorough and customized contracts is a crucial protection for those starting a new business or hoping to expand their existing operations.