Contracts are an important way to do business with others whether it is contractors, vendors or partners. Having properly written and executed contracts can help save you in the event that the other party breaches. What you put into the contracts should always be reviewed carefully by a business attorney. Failing to have the right clauses inside any business agreement or contract may be something that an owner discovers too late. This can lead to costly legal expenses, time spent away from the office trying to manage a dispute, and unnecessary distractions.
Your individual business concerns should be incorporated into these agreements so that you can make informed decisions about your future. Your company’s very survival in the marketplace may depend on your ability to effectively manage your risks and meaningful contracts are just one aspect of this. There are four main contract clauses that every business owner should consider.
Payment and Billing
The contract language should clearly address when payment is due, the rights in the event of non-payment and penalties for late payments. This helps to ensure that both parties are on the same page as the relationship gets started.
Any Guarantees, Certifications or Warranties
A contract should never promise complete accuracy or absolute compliance with the standard as this assumes a level of liability that goes well above what is required legally. Professional liability insurance is typically not intended to cover breach of warranty or breach of contract so ensure that you had not exposed yourself to significant breach of warranty.
Consequential Damages
A contract should always outline any indirect expenses that may be associated with a professional’s failure. This provision helps to ensure that neither the client nor you are held responsible for consequential damages that may be due to any alleged failures by either party.
Standard of Care
A clause should always be included inside your business contracts that references the standard of care to which each person will perform. Any contract language that seeks to raise the standard of care can increase that person’s risk. Increased exposure may not be covered by professional liability insurance. Consulting with an experienced business attorney is strongly recommended if you find yourself in the position of putting together and using contracts on a regular basis. Properly executed and well written contracts can help protect you from significant lawsuits and other costs.
