Every business owner alive has, at one point or another, wanted to forgo the extra time and expense involved in having a lawyer document each and every business agreement. And the truth is you do not necessarily need to bring in a lawyer for each and every agreement. If that sounds odd coming from an attorney, read on.
A written agreement that lays out the obligations for each party involved in a specific project is often legally binding and does not necessarily require a lawyer’s input. It is, however, impossible to overstate the importance of this–it must be a clear, detailed, comprehensive and unambiguous record of the agreed upon terms to ensure quick (and favorable!) resolution to any of the disagreements that could possibly arise.
You can document a basic business agreement without too much hassle. Simply send the proposed terms of the contract to the other parties and request confirmation that all the terms are correct as written. If you have agreement on all the terms, the written memorialization of it will help you navigate any issues that may come up and even provide evidence of the parties’ obligations if you do end up in court.
If it turns out that your understanding of the terms is different than their understanding of the terms, it’s better to get that ironed out before you start doing business, and you may not have discovered that you didn’t have a common understanding if you hadn’t sent the confirmation of the terms. That is, until you started doing business and someone’s expectations were not met, and then trouble ensued . . .
If you want to go that extra mile once you have agreed upon terms: print, sign, send, and receive the document with their signature in turn.
What points are most essential? Here are four of the fundamentals:
Remember that you are memorializing an agreement – so be like a journalist getting the whole picture. You need to detail Who, What, Where, and Why. Don’t forget to include the measurable result that indicates the obligation has been met, or if a measurable result isn’t possible in that circumstance, indicate who evaluates that a task has been satisfactorily completed – otherwise you could find that one person thinks they performed the contract and the other thinks otherwise.
Lay out a schedule. Specify the duration of the agreement and any associated deadlines. Milestones are best established beforehand so that all parties know what to expect. Payment, too, is best definitively scheduled.
Again, precision is key. The entirety of the payment process ought to be written out–who will pay who, what form will that payment take, and when will it occur? Don’t forget to put in place clear consequences for late payment.
No matter how much you scrutinize each line of a contract, disputes can still arise. That’s why it is so vital to determine how conflicts will be handled before one breaks out. Often, businesses opt to submit matters to mediation or arbitration before proceeding to court — while it’s not always less expensive (although it can be), mediation and arbitration is not a matter of public record (no bad press) and the potential for resolving the dispute in a positive way that provides for the possibility of continuing a good working relationship is much higher than when going through the court process.
Mediation and arbitration only happens by agreement, so you need to have it in your contract if you want to stay out of court. Don’t forget to specify which state’s law will govern the dispute, as well as who is responsible for legal fees.
Whether the agreement is with clients, vendors, partners, or anyone else, never neglect to get a written document that will have your back. Not only does it protect your business, it will demonstrate to the other party that you take the relationship seriously. Likewise, if the other party proposes forgoing a written contract, you should look long and hard at why that might be.
While the above is a solid framework for a basic business agreement, you should never put yourself in the position of being uncertain about a contract you’ve put together–a contract can quickly expand in complexity and threaten to trip you up with a seemingly minor detail. That’s what we’re here for – an experienced business lawyer can read through the fine print and ensure you get the maximum protection possible.
It can even be a good idea to create a template for certain types of agreements you use frequently–you can submit the template for review once and have it on hand whenever you need it. We can also help you avoid costly legal disputes through proactive business planning, including crafting agreements and procedures to ensure you comply with state and federal law.
To learn more about our personal approach to business planning, call us today at 612-206-3701 or reach out via our online contact form to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.
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