Business is difficult, and legal compliance doesn’t make it any easier. However, contracts are something you have to get use to as a business owner. There are many things that you can walk yourself through, particularly on the compliance side, as there are state agencies that make proactive efforts to help you meet regulatory obligations. However, contracts are an area where you are set out in the woods on your own.
Not every contract has to be in writing to be enforceable, but unwritten contracts can be exponentially more difficult to enforce. Even written contracts won’t necessarily be interpreted as you want them to. Contracts are an area where it is easy to feel like you can just write what you mean and get by … until it’s too late. It is easy to do Google searches and find example contracts that you can make edits to and rely on. The problem is that contracts are one of the loosest areas of law. There are very few straight forward statutory regulations.
Contracts Based on Common Law
The majority of contract law is based on hundreds of years of common law—court-made law that has been created through the accumulated experience of judges. Depending on your state, there may be some additional requirements affecting different kinds of contracts, i.e. the Texas Deceptive Trade Practices Act, which regulates how businesses communicate with consumers, among other things. Moreover, there are many small ways to stumble, for example: drafting an employment contract for a key employee with an overly broad non-compete agreement and having the entire contract thrown out because you did not have a severability clause; or not including language limiting the contract to the specific writing and opening the door for consideration of oral or written promises outside of the contract.
Contracts Need To Be Built On Certainty
Contracts are thwarted by uncertainty. While the basis of your contract may be something as simple as: my business, business A, will purchase fifty pounds of raw material X from business B for Y amount of dollars, that statement is rife with contractual uncertainty. Your agreement should be reduced to a writing and may have to be to be enforceable under the statute of frauds. It should include language about delivery time, place, and method. It should have any guarantees and warranties that you require. It may need to include remedies for breach of contract or have language for dispute resolution. It is often beneficial for businesses to include arbitration clauses in their agreements and large businesses regularly use them to avoid risk and limit cost. Beyond the subject matter of your agreement, your language matters a great deal as well.
Creating Partnership With Contracts
Contracts create a kind of partnership between the parties to the contract. Careful drafting and careful review of your contracts and contracts that are presented to you are essential business practices. The overall point is that hiring a lawyer generally serves to lessen or eliminate risk. Your contracts are a prime area where you want to eliminate as much risk as you can. While you may view legal assistance as a cost center, the real benefits of proactive legal assistance are the difficult-to-calculate legal issues and costs that you did not face. When you are looking at drafting a contract or reviewing a contract that has come in front of you, you should do what a businessperson does and evaluate what level of risk you find acceptable. If the contract is at all important I would highly encourage you to seek legal assistance in the review of it or the drafting and editing. To save yourself attorney time and money feel free to make an initial draft or make comments on an initial review of a contract you are looking over, before you involve your attorney. The best attorney-client relationships are the ones where we are able to work together.
Disclaimer: The information and materials on this blog are provided for general informational purposes only and are not intended to be legal advice. The law changes frequently and varies from jurisdiction to jurisdiction. Being general in nature, the information and materials provided may not apply to any specific factual and/or legal set of circumstances. No attorney-client relationship is formed nor should any such relationship be implied. Nothing on this blog is intended to substitute for the advice of an attorney licensed in your jurisdiction. If you require legal advice, please consult with a competent attorney licensed to practice in your jurisdiction.
Photography image by Michael Flan; imaged sourced by Flickr Creative Commons
