Best Practices for Making Solid Business Contracts

Written contracts are a part of business and essential for both parties in an agreement. When you’re planning to provide services to a client, the contract is the backbone of the service as it delineates the details of services you’ll provide, as well as other agreements like the pay schedule and timing of deliverables. It gives both you and the client a promise in writing. The contract is beneficial both for your business as well as the client, and will keep the arrangement legal on both sides. Solid business contracts have the following important features, which you should keep in mind at all times.

  • Make it in Writing – Verbal agreements may be legal and binding in some environments, but they don’t usually hold up in court. When it comes down to your words against theirs, it is a risky situation. Protect yourself and your client by getting the contract agreement in writing to carefully explain every detail of the agreement between you and your client. This avoids further confusion and miscommunication.
  • Spell Out the Details – Now that you have agreed to get the contract in writing, it’s time to include information. Every detail of the contract needs to be spelled out exactly according to your agreement. Be careful not to leave anything out, even if you feel like it is a minute detail that may never come up. This includes a detailed description of the work you will provide, deadlines, pay schedules, consequences of not receiving payment, what will happen if you don’t complete the work as requested, details about cancellations, and anything else that you and your client find important to include. If you don’t mention that you won’t accept cancellations of services, your client can cancel the service and it may hold up in court since it wasn’t in the contract.
  • Detail Payment Obligations – The payment obligation portion of the business contract should be as detailed as possible. This includes how much the client is to pay, when the payment is due along with any upfront or pre-payment agreements, acceptable forms of payment, and additional conditions of making and receiving payments for services rendered. All requirements for payment obligations must be described in detail on the contract for it to be legal and binding.
  • State Contract Termination Specifics – With most contractual agreements between business and client, there will be a possibility of contract termination. You and your client should agree on a termination agreement that is viable for both parties. For example, as the business supplier of services you may include instances when the contract can be terminated by the client, such as non-payment or late payment for services. On the other hand, if the payment obligation is a set amount to be paid upfront before services are rendered and your client fails to do so, you may have the right to terminate the contract.
  • Disclose a State to Govern the Contract – In order to have a solid business contract, you must specify a state law that is to govern the contract. Many times contracts are between a business and client that are located in different states, in which this is an important detail to include. You must choose one state’s law for the contract, which you will agree on before the contract is written.

If you follow these essential best practices for making solid business contacts, you can avoid a lengthy legal battle if something were to go wrong later on. You don’t want to simply have a verbal agreement, as this is just asking for trouble. Keep it legal and fair for both you and your client and have continued success.