Contracts are a central part of the operations of any business. Contracts are the means by which supplies are acquired, transactions are made, and, often, how sales are accomplished. Therefore, it is of utmost importance that businesses execute enforceable agreements. Failing to pay attention to contracts can potentially undo the hard work that people put into building their businesses and result in lost profits – it may even, at times, cost the business owner the business itself.
You should consult with an experienced counsel in analyzing and executing contracts for your business. The Law Office of Richard J. Arendt has been serving clients in the greater Chicagoland area for over 38 years and can provide you with seasoned legal advice regarding how to ensure that contracts are legally sound.
Most Common Mistakes in Business Contracts
There are common errors that business owners commit when it comes to contracts. These mistakes include the following:
- Not having a contract to begin with when conducting business transactions. Contracts protect you and your business, and while promises are noble, they are not enforceable under the law unless in a contract. The proper running of a business is conditioned upon your ability to rely on vendors and contractors, and contracts allow you to be prepared for business uncertainties and allow you to move forward seamlessly regardless of the circumstances.
- Failure to explicitly state what the parties will consider a breach of contract. Considering the potential worst-case scenarios is a good exercise for business owners to engage in. Memorializing those scenarios, and the remedies that would be available, is important for business partners to consider at the beginning of the business relationship. It provides options for moving forward if the transaction as contemplated by the parties does not move forward.
- Failure of consideration, resulting in an unenforceable contract. The enforceability of a contract is dependent upon the existence of consideration. It is what is given exchange for what you get in an agreement. There has to be something, otherwise, a court can’t enforce the contract. You must ensure that compensation is provided to everyone who contributes to your business.
- Failure to set forth the right means of resolving disputes. Most contracts don’t consider the most efficient way of resolving disputes that may arise in the contract. For small businesses, litigation is often far too costly to be the only means that contract disputes may be pursued. Parties should account for their ability to resolve disputes through costly litigation and consider non-litigation means of dispute resolution like mediation or arbitration.
- Failure to set forth clearly the terms for termination of the contract. For many small business contracts, they often only permit the parties to terminate the contract if a breach occurs. However, contracts should provide for a means for both parties to terminate the agreement without some sort of breach. Sometimes, it makes the most business sense to terminate and move on even if both parties are trying to make the business relationship work.
- Failure to properly list all of the issues during negotiation. Parties in a negotiation often don’t list out all of the issues and interests that are at play and explore them with each other to determine whether there is a mutually advantageous agreement that may be reached. Most parties only look at a few key terms, instead of everything that may be at play, which may result in lost opportunities. Setting forth all of the variables and negotiating them before a contract is executed may result in additional value to one party or both.
If you run a business and are contemplating business transactions with others, the Law Office of Richard J. Arendt can help you execute well-drafted contracts to accomplish these transactions. Dedicated to providing expert counsel in the greater Chicagoland area, including Boone, Cook, Du Page, Kane, McHenry, Lake, and Will counties, Richard J. Arendt has decades of experience helping business owners with drafting enforceable contracts to facilitate the needs of their businesses.