What makes a bulletproof contract? In business, as in life, things don’t always go as planned. Business relationships can change in light of information you didn’t have, legal concepts you didn’t know, and events you couldn’t foresee. Your contracts should include these proactive elements to help you prevent potential lawsuits.
1) Allow for Future Changes
Your contract may suit you perfectly in the here and now, but what happens when your business faces changes in the future? When things inevitably do change, you may find yourself locked into a contract with limited or no ability to deliver on its terms.
To avoid nasty surprises and minimize liability, your contract should include a method for renegotiating terms. Ask yourself whether the contract should be renegotiated every few years, renew automatically, have an easy termination clause or provide for a specific method of renegotiation. You should also think about any possible circumstances that could void your contract in the future, like if one party goes out of business, files for bankruptcy, or an owner passes away.
It also makes sense to review your standard template contracts at least once a year or even more frequently if you have any specific business dispute scenarios that perhaps could have been better addressed in your template contracts.
2) Avoid Lawsuits
If you do enter into a dispute with the other party for any reason, you may have to face the possibility of a lawsuit. Even so, you may not be prepared to handle the time, stress, and expense of a formal suit.
Every contract should include a dispute resolution clause to explain exactly how you will handle your differences with the other party. If you’d rather avoid a lawsuit in most cases, this clause can include the option or requirement for mediation, arbitration, or another method as your go-to choice for dispute resolution. A requirement for mediation before filing a lawsuit could avoid a lawsuit altogether. A pre-lawsuit mediation gets both sides to sit at the table and discuss their differences and hopefully resolve the dispute without the need of filing a lawsuit.
3) Pay Attention to Specifics
Your contract can run into problems when its terms are too vague or lack specific elements that are critical to your side of the agreement. You should also make sure you completely understand the specifics of the other party’s terms, whether they involve a set time frame, quality level, or other key details. For example, if you agreed to deliver goods to another business by a certain time or date, you may not be sued for delivering a day late—unless your contract clearly and explicitly states that a timely delivery is essential. You can also avoid being sued automatically if you include a clause in your contract that requires written notice and an opportunity to cure any deficiencies or breaches.
When the other party underlines the critical nature of their terms within the contract, think carefully about whether you are equipped to meet those terms and whether you should be provided an opportunity to correct any deficiencies. On the flipside, a late delivery or poor performance from one party can affect your own ability to meet the terms of other business contracts, so make sure the first contract is clear about your specific needs. In either case, specificity can potentially save you from a breach of contract lawsuit.
4) Prepare for Unforeseen Events
It may seem strange to provide for the possibility of a fire, flood, explosion, or even war, but your contract should always be prepared for the worst. Causes beyond your control could make it illegal, impractical, or impossible to perform in accordance with your contractual responsibilities. Without the right provision, you could still be held to those responsibilities and potentially be sued for breach of contract.
Your contract should include a “Force Majeure” clause, allowing either one of you to suspend or terminate your contract obligations in light of circumstances beyond your control. The term is French for “superior force,” referring to those unexpected situations that could affect your performance. If something like that should happen, you’ll still have a valid contract as long as you notify the other party in good time.
Because every business has different needs, you may need additional legal provisions in your contracts, aside from these basic four. The experienced attorneys at Ser & Associates can provide you with a specialized and strategic plan for every contract you create or renegotiate. Call us to discuss your next contract. We will use the many legal tools at our disposal to protect your business from liability and set you up for success.
