How Does a Contract Protect Your Business? | Contract Law Blog

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Don’t become a horror story—protect yourself and your business from catastrophe by using a signed contract for every client, every time. If you aren’t sure what contract terms to include in your legally binding contract, you can always start with a done-for-you legal contract template. Are you ready to try your hand at creating your own legal contracts? Here are a few pieces to consider.

How does a contract protect your business?

After all, it’s just a piece of paper—right? How will one little piece of paper protect my whole business? Contracts help set expectations for all parties involved. They also give you legal footing should either party get confused or fail to fulfill their part of the agreement. It’s written proof that an arrangement exists; otherwise, it’s “he said vs. she said.”

Whether it’s a contract for services you provide, or a contract for vendors, employees, or independent contractors, get a signed agreement to make it legit. Include all details, no matter how minor they may seem; otherwise, you will end up eating your words later.

How does a contract protect your business? - The CEO Legal Loft

A record of contract information

Many contracts start out by identifying all parties involved. Including necessary information such as name, date, address, and phone number is an excellent place to start. However, it’s in your best interest to include even more details. If push comes to shove, you want your contract airtight. Consider if the following details are right for your business agreement:

  • Business name
  • Entity type
  • Signer’s title

Explains the “What” of the Contract

Many contracts start the agreement with a short overview. You can define terminology if you’d like to avoid confusion, explain the purpose of the contract, or include any underlying assumptions.

Lay out contract terms

Next is the real “meat” of the contract. The contract terms are where you lay out what you will or won’t do, penalties, payment terms, and more. You want this to be as readable and understandable as possible—If you don’t understand it, will your client? You want your client to understand and refer back to the contract with confidence, so they know what they are signing and adhering to, under no uncertain terms. Think of it as a reference sheet, rather than a menacing legal document. Areas you may want to address include:

  • General services hired with quantities
  • Duties of each party
  • Rights of each party
  • What is not included
  • Deliverables
  • Important dates
  • Expiration dates
  • Prices
  • Payment arrangements with due dates
  • Taxes
  • Interest
  • Late Fees
  • Situations that may increase the price
  • Termination clause
  • Potential damages should the contract be broke

Contract clauses to consider

After you get the nitty-gritty details covered, you’ll then want to think about the standard clauses you’d like to include with your contract. These are popular contract clauses: 

Warranties- Explain that something is true or guarantees it will happen; a written promise of an intended outcome. 

Guarantees– Performance guarantees discuss what will or won’t happen if the client isn’t satisfied or if the outcome doesn’t turn out as expected. 

Disclaimers – Reduces your liability if the information, product, or service is used, or misused. 

Time is of the Essence- The contract has specified time frame; if any party fails to provide the materials or services by a set date, it is considered a breach of contract. 

Limitations on liability– In the event that your company is held liable, this clause could put a cap on the dollar amount for which you are responsible.

Waiver- Covers you in case you intentionally or unintentionally fail to enforce any portion of the contract, it basically states that just because you let it slide once doesn’t mean you will every time and that you can still enforce the contract in the future. 

Liquidated damages– A set dollar amount in the contract that can be awarded if the contract is breached or failure to perform. 

Confidentiality provision– Outlining what will happen with sensitive client information. 

Force Majeure– Releases everyone from the contract should there be an “Act of God” that is out of your control, i.e., sickness, natural disaster, or other circumstance that makes it impossible, illegal, or inappropriate to fulfill the contract. 

Indemnification– Specifies that one party will pay another party in the event of potential loss or damage. 

Default– Explains what happens if a signer fails to uphold their part of the contract, i.e., not paying on time, failure to provide materials, etc. 

Arbitration– Outlines legal options should the contract go sour and the courts need to get involved. 

Governing law– Specifies which jurisdiction will handle any legal dispute. 

Entire Agreement– A brief statement that the contract includes the entirety of the agreement, i.e., no addendums or secondary contracts.

Severability of individual provisions– A statement that says that if any part of the agreement is unenforceable, the whole contract is null and unenforceable.

How does a contract protect your business and you? - The CEO Legal Loft

Get a signed contract

It is one thing to draft an in-depth contract and send it to your client, employee, contractor, or vendor, but it is hard to enforce it in a court until they sign the contract. It is recommended that you ensure that all arrangements have been signed and dated before beginning any work. End the contract with the following:

  • Date
  • Printed name of authorized signatories
  • Signatures of authorized signatories
  • Notarization 

Done for you legally binding contracts

Unfortunately, many small business owners and entrepreneurs jump into business without having an airtight legal contract in place. We’ve all heard horror stories of the devastation caused by faulty agreements. Will that freebie you found on your internet search really going to hold up in court? If you’re concerned about your current contract’s enforceability, but don’t have the funds to hire a business attorney, shop the contract shop at The CEO Legal Loft

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Legal Disclaimer: The CEO Legal Loft is owned by Michelle W. Murphy, LLC and is not a law firm. Nothing on this website is legal advice and no attorney-client relationship is formed by purchasing or viewing a resource or contract template on this site. If you have a specific problem and need legal advice, contact a licensed attorney in your state or the state bar.