One of the most important aspects of any business deal is that both parties know their obligations and expectations. Having the right legal documentation in place insures that all parties are on the same page and that everyone’s expectations are met.
In the event that a dispute arises and litigation is necessary, having a legally sound contract in place is your vehicle for getting the matter into court. Here’s how:
Two benefits of an effective contract
First, a contract puts specific terms of the business deal in writing. For example, a contract might include:
- The amount of consideration (including method and frequency of payment);
- Quantity, quality, service, standards, or other deal-specific terms;
- Duration of the agreement;
- What dispute resolution methods should be used if necessary; and
- Other obligations and responsibilities of each party.
All of this information is important to know at the very beginning of any business arrangement. Not only does it help guide the deal to a conclusion, but it also helps everyone know what to expect from themselves and the other party.
Second, contract terms offer you protection if a deal breaks down.
Ideally, every business deal would be completed with no complaint from either party. In real life, that doesn’t always happen. Even with long-standing business associates, things can become acrimonious very quickly when expectations are not met and a relationship breaks down.
Preparing a sound contract protects all sides by avoiding miscommunication. If either party breaches the contract, the other party can use the contract to take legal action and seek the damages.
As a business owner, you need to make sure you’re protecting your interests when entering into deals with business associates, clients, and third parties. Having sound legal contracts in place can give you peace of mind that you will be covered in the event of a dispute later down the line.