Contracts are the basis of business relationships, but many small business owners are not familiar enough with contracting at an individual level to get the most out of it. These 4 hot tips will help you avoid common mistakes and pitfalls.
Common mistakes when drafting contracts
#1: Write the First Draft Yourself
As much as many lawyers would like to pretend that it were the case, they’re not mind readers. Writing up the first draft of a contract allows you to structure the contract the way you want it. Once you’ve written the first draft – even if it’s only very rough – take it to your attorney, and have them redraft it as required. Not only will you save on legal fees for the first draft, but your attorney will also have a clearer understanding of what your intention is, and how you wish to go about seeing it happen. In the long term, it will benefit your business far more, because it puts you in greater control of what’s going on.
#2: Be Specific. Really Specific.
In contract law, the Parole Evidence Rule stops anything extrinsic to a written contract that contradicts the terms of the contract from being given in evidence in court. Anything that you think is important to the deal, that will affect your business dealings, or would simply help you out a bit should be put in writing. Don’t just mention it, be painfully specific about every point, and every action to be undertaken in the contract, which is going to affect you. Step through every phase of the task or tasks the contract covers, and think about everything you need, then write it down. Once you’re done, take it to your lawyer to see if you’re missing anything vitally important.
#3: Take your Time
A common mistake among first timers when contracting is to rush through the process. Whether it’s pressure from the other side, a deadline to meet, or excitement at doing the deal, try and avoid rushing through the process. It can result in important terms being omitted, drafted incorrectly, or even something that will render the contract void!
# 4: Everything is negotiable. Well, Almost…
There are some terms in an agreement which are considered illegal, but by and large, everything in the contract is negotiable, including the items the other party says are off limits – often, they just haven’t reached the tipping point where it becomes negotiable yet. Treat every term as though it is flexible until the ink on the contract is dry, and don’t be afraid to participate in a little give and take to reach your end objective.