Creating and Using Small Business Contracts Effectively
Contracts are at the heart of today's business processes and practices. The vast majority of businesses operate smoothly with valid, legally enforceable written contracts, clearly specifying the terms and conditions of business interactions. Contracts protect your business, clarify relationships and processes, and support the legal and financial environments in which your business can flourish and grow. This article provides a brief introduction to drafting and finalizing effective business contracts for small business owners.
Business contracts contain a legal offer and an acceptance of that offer by willing, mutually consenting participants. Different types of contracts are used in different contexts and situations. For example, sales and supply contracts are quite different from personal service and employment contracts, which in turn differ from contracts related to starting and running a small business.
Most contracts contain language designed to reduce the uncertainty in sales agreements, employment arrangements, and general business interactions. Contracts provide security and a clear path to resolve issues in the case of misunderstandings or an actual breach of contract terms. For that reason alone, many small business owners decide that a contract lawyer or professional is an obvious choice to provide contract services.
Creating Your First Draft
Information gathering is required before committing to a contract's first draft. Talk to those you intend to contract with to develop a mutual understanding of the general shape, terms, dates, and overall scope of the contract. If possible, commit those ideas to a term sheet from which more detailed contract language can be developed later.
Small business owners with prior experience and high levels of confidence are often comfortable drafting their own contracts from scratch or using free online contract templates. Editing and modifying contract templates or pre-existing contract documents is then relatively straightforward with various editing tools. If you want to copy sections from one contract document to another, you can use a free tool to extract PDF pages and save the information in a modified PDF file.
Some small business owners may decide a template is not an appropriate starting point. Instead, employ a professional to look over the term sheet and prepare a customized first draft of the contract. Specialized termination clauses and an agreed-upon dispute resolution mechanism are useful additions to many contracts at this stage.
Finalizing the Deal
Signing a contract is a serious step that, once completed, creates a valid and enforceable contract. Be sure the terms and priorities are consistent with your responsibilities and benefits. Here again, professional advice is often appropriate, and walking through the document with a contract lawyer or professional is helpful. If the right amount of effort was expended in contract negotiation and drafting, there will be no surprises or unintended consequences.
Execution and monitoring of the contract complete the process. Enjoy the peace of mind that comes with your well-crafted and smoothly executed contract undertaking.
Learn more by sharing ideas and talking to like-minded entrepreneurs and contract law or service providers in your business community. Join your local chamber of commerce today.
This Hot Deal is promoted by Searcy Regional Chamber of Commerce.