+How You Can Easily Avoid Any Of These Mistakes
No matter what business you are involved in, contracts are essential!
Having legal contracts in place not only protect your business but also define expectations, they outline the rights of all parties involved in an agreement, they give remedies should trouble arise, and overall are an essential part of conducting any sort of business.
While they’re oftentimes seen as an annoyance and a hassle they are in reality a powerful tool that can make your business life so much easier!
Unfortunately mistakes are made when creating a contract which essentially makes them useless when they’re needed most! Contract mistakes can be very costly leading to disputes, financial losses, and damage to relationships between businesses and reputations.
That is why we put together this list of 10 common mistakes that we have seen businesses commit when creating and using legal contracts.
By understanding what the mistakes are you will have a much better knowledge which in turn will ensure your contracts are solid, enforceable and most importantly protect your interest!
So without further ado, let's talk contracts…
Common Contract Mistake #1: Not Having A Contract
The first and biggest mistake we have seen businesses make is simply not having a contract.
Word of mouth and just a handshake isn't always enough, a set document signed by all parties involved is the best form of contract you can have! By at least having a contract in place you will have at least some form of protection or legal precedence put into place.
Yes, your contract could be full of mistakes, but that is why we made this blog and as long as you avoid the next nine mistakes in your contract you should be fairly well off!
Common Contract Mistake #2: Not Clearly Defining Parties & Roles Involved
One of the most common contract mistakes we have seen is failing to clearly define the parties involved and what their roles are to be.
Not being specific when identifying the parties can lead to confusion, disputes, and even render the contract unenforceable should it be taken to court over a dispute.
By always ensuring that the contract clearly states the full legal names and roles of all the parties involved, there will be no room for mis-interpretation and mistakes.
Common Contract Mistake #3: A Lack Of Clear & Specific Terms
Your contracts should always provide clarity and specificity in terms and conditions.
By being vague or by not using specific language you can create loopholes that could possibly open the door for misinterpretation and you can then be taken advantage of. By being very detailed when outlining any rights, responsibilities, timeless, or anything else important you can set expectations and avoid misunderstandings.
You will not regret being as specific as possible and don’t ever think you are overdoing it! Being safe is better than being sorry.
Common Contract Mistake #4: Not Including Dispute Resolution Solutions
The point of contracts is to try to minimize disputes or at the very least solve a dispute fast, cheap, and easily.
However we have seen the common mistake hundreds of times of not including any dispute resolution terms. Failing to include appropriate dispute resolution mechanisms, like mediation, arbitration, or choice of jurisdiction, can result in vastly costly and time-consuming disputes that you likely don’t want any part of.
Play it safe and consider the nature of your business and any potential disputes that could possibly arise. Once you are aware that a certain dispute may arise maybe you should be more specific in the contract to set realistic expectations.
If not be sure to include an exact process you and the other party involved can take in order to meet a solution to the possible disagreement.
Common Contract Mistake #5: Failing To Include Exit Strategies
While everyone is hopeful everything will work out it always isn't the case. Be sure to include termination and exact strategies.
By including these you not only protect yourself but all parties involved. Not including these could result in huge difficulties when ending the contract or resolving disputes. Don’t forget to clearly define the conditions that must be met for a party to end the agreement such as the notice period required and any financial or nonfinancial consequences involved.
Common Contract Mistake #6: Ignoring IP Rights & Considerations
Intellectual property (IP) rights are critical assets for many businesses as you probably already are aware. So why wouldn't you include them in a contract? It seems obvious but we have seen this mistake so many times as it can oftentimes simply be forgotten.
However, failing to address IP ownership, licensing, or infringement issues in contracts can lead to disputes and legal complications.
Be sure that the contract clearly specifies the ownership of intellectual property created or used during the contract term and also outlines any licensing or restrictions that may need to be put into place.
Common Contract Mistake #7: Not Enough Risk Allocation & Limitation of Liability
All contracts should allocate risks and address liability limitations to protect all parties involved.
By failing to do this the result can be catastrophic such as significant financial burdens or legal consequences. Never forget to clearly define the extent of liability and put in place reasonable limitations to protect against potential losses should something bad happen.
Common Contract Mistake #8: Not Including Change & Amendment Procedures
Everything changes with time including business circumstances!
This requires adjustments to specific contracts, but if you don't have a clause or procedure set in place of how to go about this well you can see how it can get dicey.
By not including change and amendment procedures it can make it extremely difficult to modify the contract when necessary or as needed. Be sure to establish a clear process for making changes. Trust us it will make your life easier.
Common Contract Mistake #9: Not Including Confidentiality & Non-Disclosure Agreements
As always but nowadays more so it is very competitive. That's why protecting your sensitive information, especially information that gives you a competitive edge is extremely important.
By not including confidentiality and non-disclosure agreements when necessary you could expose your business to the risk of data breaches, intellectual property theft, or unauthorized disclosure of proprietary information.
Be extra careful to clearly define the obligations and responsibilities of all parties involved regarding the confidentiality of sensitive information.
Common Contract Mistake #10: Not Reviewing & Updating Contracts Frequently
When you clearly set in place the terms in which you can update the contract (mistake number 8) don’t forget to actually take advantage of that and change the contract as needed!
Contracts are not meant to be set in stone. Lots of things change over time such as business dynamics, legal regulations, and industry standards.
By not reviewing and updating your contracts regularly you are setting yourself up for failure as the contracts could be outdated and not reflect the current business landscape. Set aside time for periodic contract reviews and updates to ensure they remain relevant and in line with legal requirements!
Other Mistakes We See Frequently…
The above 10 mistakes are the most common mistakes we see! However we have seen it all unfortunately so we will quickly share with you other mistakes we frequently see businesses make when creating a contract.
- Not seeking professional legal counsel when needed.
- Forgetting to include a force majeure clause.
- Ignoring the governing law and jurisdiction bodies.
- Simply not doing enough due diligence.
- Incomplete payment terms.
- Verbal agreements or informal contracts instead of clearcut documentation.
- Failing to include specific performance or remedies should expectations not be met.
- Forgetting about contract renewal or expiration dates.
- Not enough communication or simple misunderstandings between the parties involved.
We know, there are a lot of mistakes you could make… But here’s how you can avoid them all!
Obviously contracts can get quite confusing and complicated pretty fast…
Realistically you should always have a professional attorney write any legal contract to ensure there are no mistakes and it is legally sound.
Unfortunately it can be very expensive and oftentimes lawyers will take a bit of time to get back to you with your contract and sometimes you need a contract fast.
That's where we come in!
We have Every Contract You Need instantly available to you!
Our contracts have been drafted by industry leading attorneys! All you do is download the contract you need and fill out the easy to use template and you have a legally binding contract WITHOUT the mistakes we listed above.
It's that easy!
Instead of paying huge lawyer fees or risk it and doing it yourself and possibly ending up with a number of mistakes just do it the easy and fast way and use our contract templates!