Four questions to ask when preparing a contract

Contracts are a vital cog of any business as they provide security and proof of agreements made by two separate parties. They offer your business protection on the unlikely occasion one party decides to breach an agreement that had originally been made.

In order for a contract to be legally binding it does not have to be in writing, it can also be a verbal contract. However, written contracts offer material evidence that an agreement was made and the terms of the agreement that was made, therefore it is highly recommended to put all contracts in writing. For most SME business operations a contract will generally establish an agreement that has been made with a customer.

The following are four key questions to ask when it comes to preparing contracts for your business:

What is the best way of making a contract?

A great practice for smaller businesses is to have both parties sit down together, read the contract, mutually agree on its terms in person and sign the document. However, this option can be time consuming and may become less viable as your business begins to expand, making it difficult to manage.

As your business grows it is natural to use a range of different communication options, such as email, fax and phone, to get the contract signed as promptly as possible. So long as the contract has been signed by the customer and returned to you, any breach made can be disputed legally.

What are unfair contract terms?

However, just because a contract has been received and signed doesn't automatically make it legally binding. If you find yourself in court due to a contract dispute the terms and conditions will be closely scrutinised. It's important to ensure the terms and conditions of your contract are clearly set out and fair. Any terms or conditions within the contract that are deemed unfair could immediately put into question the legal status of the contract.

Typically a contract will be deemed unfair on the occasion that the terms damage one of the parties' rights and obligations.

What happens if the contract is unclear?

In order to avoid complications in the event you end up in court with a contract dispute, all written contracts constructed should always be clear and concise. In the event that are contract is vague or unclear, it is highly possible that a court will deem it to be not legally binding. Therefore, the terms and conditions must be clearly set out in fact and not just in principle.

Should I seek expert advice?

Given the complex nature of today's legal system it is important to remember that writing your own contracts may not always be in the best interest of your business. Contracts, when written properly, offer a safety net to your business in the event that a breach occurs. The natural instinct for many SME owners may be to complete work themselves in order to save money, however, legal disputes can often be long and costly so it's in the best interest of your business to have all contracts right from the start.

For those who are confident in their own abilities to complete a fair contract that is clear and concise, it may be best to write them yourselves. However, it is still recommended to employ the services of a professional to ensure they are watertight from a legal perspective.


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