Best Practices for Businesses to Follow When Managing Business Contracts
A well-written contract not only protects your business from dispute-related liabilities, but is the best tool for holding all parties accountable and ensuring that the mutually agreed expectations are met. While in some cases verbal contracts can be enforced, as a business owner, you should always push for written contracts. In this article, the Lynchburg Regional Business Alliance explores the best practices to follow for negotiating and creating business contracts.
The Need for Contracts
Before we get into the nitty-gritty of contracts, here are two important reasons why you should enter into one for every project.
Protection for Both Parties
Verbal discussions regarding expectations, payments, and timelines can easily be misunderstood or forgotten over time. JD Supra notes that this increases the chances of disputes and the non-completion of projects. A written contract will include concise information regarding deliverables, submission timelines, and more which cannot be altered without a fresh round of discussions post-signing.
Additionally, clients working with your business will want to protect their best interests in the same way you do. Entering into a contract will serve as the first step toward building trust and provide both parties with confidence to move forward without hesitation.
Laying Down Payment Expectations
Disputes over payments may be the most common grievance faced by businesses. You can avoid this predicament by entering into a contract with a specified payment schedule. In the event of non-payment, the contract can be used as a binding document to collect dues through legal means.
When it comes to payments, it’s best to follow a proactive approach. As you reach closer to the payment date, start sharing reminders with your clients. Additionally, you can send an invoice before the due date as well.
Best Practices for Creating Contracts
If you’ve undertaken the responsibility of creating the contract, here are three important aspects to follow:
Use Simple Language: Concise sentences spread across numbered paragraphs is the best approach to making contracts. Avoid using excessive legal jargon, which can confuse the client and extend negotiations.
Include Conflict Resolution: As reported by Hendershot Cowart PC, resolving conflicts through arbitration will be a cost-effective method rather than taking things to court. Create a specific section in the contract that mentions details about the arbitrator and how parties can file a complaint.
Include a Confidentiality Clause: During projects, clients may have access to data sensitive to your business. To keep the business protected, include confidentiality clauses or create a separate non-disclosure agreement (NDA).
Contract Negotiation Tips
Contract negotiation is the process through which important aspects of the project such as goals, compensation, timeline, and expectations will be mutually agreed upon. To get the most out of your negotiation, follow these steps:
Discuss the Contract in Parts: A smart approach to negotiation is to create a list of important points to be discussed before the meeting and review them categorically.
Be Open to Compromise: In any contract, there is bound to be an element of give and take between parties. Do your best to act collaboratively but know that the amount you can compromise will be based on the business's financial health.
Have a Plan for Ultimatums: Being on the receiving end of an ultimatum is never good, but in those times it’s important to ascertain how important the contract is for the business. If you can, it’s best to walk away from unruly clients.
While at times parties still meet in person to sign contracts, the popular approach is to get them digitally signed. Use an application that lets you create, edit, sign, and share contracts all in one place as well as utilize sections of an existing contract to extract pages and just pull them out of your PDF to eliminate the need to create a contract from scratch. Before negotiating and entering into any contract, remember to consult with your lawyer and ensure that all the terms agreed upon are in the best interest of your business.
With these tips in mind, you’ll soon be managing your business contracts with an efficiency you’ve yet to experience. Remember to draw up well-conceived contracts that include conflict resolution, payment terms, and a confidentiality clause, and use PDF technology to pull specific information as needed.