Most small businesses in the U.S. will bring in less than $50,000 in receipts every year.
But don’t let this statistic drag you into a false sense of security.
Contractual disputes over small amounts can cause a huge number of problems. It doesn’t take much for you to enter a scenario where you are paying thousands of dollars to solve a dispute over a contract.
The vast majority of companies use a form contract. This is a basic template used for all clients. It can be customized accordingly. You may decide to bring in a personal lawyer to help with this.
When creating a form contract, there are a number of clauses you have to add in order to avoid complications later. This guide will detail the main aspects you need to take into account.
Get an Example
Your first task is to look at what other companies are doing. While you are unable to walk into their headquarters and ask to see a copy of their form contract, you can look online and find many samples available for you to browse.
Understand that the goal is not to reinvent a contract to make it unique. Nobody has copyrighted or trademarked a contract.
Everyone in your industry uses a similar style of contract because you are in the same business.
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The last thing you want is to leave holes in your contract that can either leave you open to legal action or exploitation later on.
The Presentation of the Contract
A contract should look professional, as opposed to something your twelve-year-old daughter concocted when she discovered Clipart.
Stick with standard typeface and font. Use your sample form contract and leave everything about the style the same.
Professional and boring is always best. At this stage you are no longer trying to market yourself.
The language you use should be relatively simple. Keep things short and to the point. You want the other person to understand it. By cutting down on the legal jargon, you are also reducing the length of the contract.
And that’s important because you don’t want to delay a deal because someone has to employ a lawyer to help untangle what everything means.
The financial part of the contract is always the most important. Make sure you clearly spell out how much money is to be paid, when it is to be paid, and the manner in which it is to be paid.
If there are any penalties, such as interest or one-off fees, you should make this clear.
Most legal disputes happen when it comes to issues over payments.
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Warranties and Representations
Try to minimize anything to do with warranties and representations of the product. Stick to the facts so your contract can’t be used against you should your contract ever become a piece of evidence in a court case.
You should also go out of your way to include any limitations on your liability.
For example, if the product doesn’t meet the person’s expectations you have to allocate responsibility. In other words, what are you going to be responsible for?
Force majeure protects you against unforseen events, and should be a clause in every contract.
These are most commonly known as acts of God. So if a tornado happens to randomly come down and destroy your office you can’t be held responsible legally for any inconvenience caused to the client.
This is a standard phrase you will see at the bottom of all contracts.
The final section of your form contract should include something about how you will resolve disputes. Disputes happen and there should be a solid, clearly defined process for dealing with them.
This will help to stop the introduction of lawyers and the beginnings of a long and expensive court case.
You will likely have a standard process in place that your company abides by for all clients.
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Any contract can be customized based on the needs of the client. You shouldn’t go through too many changes without the help of an experienced lawyer by your side.
The last thing you want is to risk leaving yourself open to legal issues further down the line.
So how will you make sure that your business doesn’t get stung by what’s in your contract?