Contracts are an integral part of running any business. They help establish the terms and conditions of transactions, including the rights and responsibilities of all parties, thus helping resolve disputes that may arise during or after a transaction.
Creating contracts for your business can feel daunting if you do not have a legal background. But worry not, as this guide seeks to help you understand the process of creating and using a contract as a small business, which will be helpful when writing one.
Understanding Contracts
Before delving into creating a contract, the best place to start is to understand the several elements of a contract that must be fulfilled to make it legally binding. These include:
Put It in Writing
Oral agreements are rarely enforceable in court, especially with no witnesses. Even when there could be witnesses establishing the truth can be a real challenge.
So it is always important to have your contracts in writing, especially if the transactions involve substantial amounts of money.
Include Contact Information of All Parties
The first and most essential thing you want to have on your contract is the names and contact information of all parties involved. Besides their names, include other details such as billing address, physical address, and alternative address.
Also, ensure that you get the spelling of their names right. Simple mistakes in the information you provide on your contract documents are enough to void your contract.
Outline the Terms and Scope of Your Transaction
Like names and contact information, the terms and scope of your transaction are critical in a contract. So it is vital to explain in detail what the transaction is all about.
You can never be too detailed about the scope of your project. The idea is to outline the expectation of both parties in a way that a reasonable person can comprehend the terms of the contract.
Also, ensure that you outline payment terms such as rates, the payment schedule, and the modes of payment (cash, bank check, credit card, and bank transfer.
Define the Circumstances of Terminating the Contract
Business agreements do not always go as planned, creating situations that could want a termination of the contract. Defining what happens in that situation is crucial as it can help protect your business from losses arising from the termination.
There are different approaches to contract termination, depending on the nature of the contract. For example, you could have verbiage stipulating that a client will not get a refund for funds paid if they pull out of the contract midway.
There are situations where all parties can agree to a termination of the contract, so it is vital to have every scenario spelled out to ensure all parties will be on the same page when such situations arise.
Add Clauses About IP Rights
IP rights can cause contention in contracts, so it is crucial to have a clause addressing them. For example, if you create architectural designs for a client, you reserve copyrights to your design by default. But there are situations where the client will want to reserve the rights.
Either way, it is important to ensure you address the question of copyrights in the contract. If your client or contract employee will have access to sensitive company information, it is essential to have clauses addressing the preservation of trade secrets too.
Sign the Contracts
A contract is only valid if all parties involved append their signatures. So ensure that all parties sign the contract and you indicate the signing dates. Sometimes the client will be worlds away which means appending a physical sign can be challenging.
Luckily you can use online resources like PDFsimpli that allow you to upload your contracts and offer help on how to electronically sign a document which you then send to the client and have them append their sign on the same or similar platform.
Final Words
Creating a business contract becomes much easier when you know the basics, as stipulated above.
However, this article may not be sufficient to make you an expert, so it is still a good idea to seek the help of a professional in creating a template that you could then use as a backbone for all your future contracts.
