The foundation of any business is typically contracts because they dictate the terms for practically everything. And, if you are involved in any business transaction, you need to know how to design, negotiate and execute a contract that protects your interests and complies with the law.
A contract is a document that defines both your rights and obligations as well as the rights and obligations of all of the other parties to the contract. Once voluntarily signed, the document is generally binding. A well-written contract can help you avoid disputes, save time and money and achieve business goals. Creating effective agreements is essential to ensuring business transactions go as planned and, sometimes, more importantly, protects you when they do not go as planned.
Design it with clarity and precision
Attorneys may draft it, but the clients and other parties must understand it. The agreements should:
- Use straightforward language that avoids ambiguity and confusion.
- Define all key terms and concepts and use consistent terminology throughout the contract.
- Avoid jargon, slang or legalese that may confuse or mislead the other party.
- Use headings, subheadings, bullet points and numbering to organize your contract and make it easy to read and understand.
Negotiate your contract with confidence and fairness.
Before entering contract negotiation, do research and prepare a strategy. Know your goals, priorities, alternatives and bottom line. Identify the interests and needs of the other party and try to find common ground and mutually beneficial arrangements. Communicate clearly and respectfully and listen actively to the other party’s concerns and proposals. Be flexible and creative but also assertive and realistic.
Diligence and compliance
Execute your contract with diligence and compliance. Once you have reached an agreement with the other party, make sure to put it in writing and sign it. Make sure that both parties have a copy of the signed contract and keep it in a safe place. Refer to it when there are questions or how to handle a contingency.
A solid agreement sets the right tone
Contracts with unfair terms or unrealistic expectations are rarely enforceable in a court of law and likely will not build a lasting relationship. Instead, fair and equitable agreements can set the tone for a long and fruitful business relationship.
