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5 mistakes you do not want in a business contract

Almost no business runs completely independently of anyone or anything else. Whether it be sales deals, vendor agreements, contractor terms or a real estate lease, a business frequently comes into contact with other entities. All of these points of contact need a written contract so each party knows what it will get, and what is expected of them.

Yet it’s easy for busy business owners to overlook this key step – even though a subpar contract can lead to significant challenges and unpleasant surprises down the line. So, with that in mind, here are five issues you want to avoid in a business contract.

1) Vague language

Few things will sink a contract like one party not quite knowing what a certain term or clause means. Not only might it require further discussion, taking up valuable time, but it could even lead to costly mistakes. Every word in a contract should be precise, reducing any uncertain gray area as much as possible.

2) There isn’t a clear method for resolving disputes

Even well-written contracts can’t prevent every possible dispute. So, what happens when your company has a disagreement over how part of the agreement was executed? If you can’t answer that question, that’s a problem. Whether it’s arbitration, mediation or another solution, having a viable path toward a resolution is key to avoiding lengthy arguments down the line.

3) Exit clauses aren’t included

Sometimes a party might need to get out of a contract. Maybe it’s because of an unexpected development or something out of their control – no matter the case, the contract isn’t sustainable. How one party can go about terminating the contract, including the timeline for doing so, should be carefully spelled out.

4) There is no definition of what constitutes a breach

What type of behavior constitutes a breach of the contract? And, if that happens, what are the penalties? It’s important to include the answers to these questions in a contract. If one party believes the other has breached the agreement, but the language doesn’t offer any support, it could lead to a difficult setback.

5) The confidentiality agreement isn’t airtight

Proprietary information – be it about financials, a product, the market, customers, or anything else – is vital to the success of a business. When sharing that information with a third party, the contract should address how that confidential information may be handled.

Because there are so many elements to consider, many businesses opt to get legal help when writing an agreement. An attorney can not only draft and review contracts, but help customize them to make sure you’re protected every step of the way.

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