When you’re in business, contracts are everything. This is why they need to be constructed perfectly. Sometimes people overlook contracts, but this is one of the worst things you can do in business.
A poorly constructed contract is a disaster waiting to happen. Many business owners don’t realize there is a problem until a dispute arises. At that point, fixing the mistake can cost thousands in legal fees.
At Swingle, Van Egmond, & Heitlinger, we provide business contract review services to help businesses avoid costly mistakes. Throughout our years in business, we have seen businesses make many common mistakes. We are committed to helping people avoid these mistakes and protect their businesses.
Mistakes Businesses Commonly Make With Contracts
To protect your hard work and your bottom line, keep an eye out for these common contract pitfalls.
Relying on Handshake Deals and Verbal Agreements
Many small businesses will settle a contract with a handshake or verbal agreement. While this may seem like a good idea at the moment, this is a recipe for failure.
When a disagreement happens, a verbal contract becomes a game of “he said, she said.” Without a written document clearly outlining expectations, proving your case in a dispute is incredibly difficult, time-consuming, and expensive. This is why you always want to put everything in writing.
Using Generic Contractor Templates
It is tempting to download a free contract template from a random website, change the names, and be done with it. While this saves money upfront, it often backfires.
Generic templates are rarely tailored to your specific industry. They also rarely account for local and state laws. A contract provision that is perfectly legal in one state might be completely unenforceable in another. In these cases, you are left unprotected.
Vague Scopes of Work
Some contracts don’t include enough details of the work that needs to be performed. When a project exceeds the original agreement, you are not paid for the extra work. This often happens when non-specific language is used. If your contract says you will provide “social media management,” the client might assume that includes daily video production and graphic design. At the same time, you intended to post only three times a week. Being extremely specific is important. Detail exactly what deliverables are included, the deadlines, and what happens when the client requests work outside the agreed-upon scope.
Ignoring Termination Clauses
What happens if a vendor repeatedly misses deadlines? What if a client stops responding to your emails? What if your own business strategy shifts and you no longer need a specific software service?
Many small businesses sign agreements that lock them in long-term with no clear way out, or allow the other party to walk away without penalty whenever they want. Be sure your contracts include clear terms for termination and the reasons for termination.
Ignoring Dispute Resolution and Liability Limits
If a contract is breached, you should consider how to resolve the dispute. Litigation is incredibly draining for a small business. If your contract doesn’t outline alternative pathways to resolve conflict, you could find yourself dragged into an expensive lawsuit.
You also want to be sure you don’t sign a contract without a liability limitation clause. Without this, your business could be held responsible for massive financial damages if something goes wrong.
This is why you want to include a clause requiring mediation or arbitration before either party can file a formal lawsuit. Also, ensure there is a liability cap. This should limit damages to the total amount paid under the contract.
When you hire Swingle, Van Egmond, & Heitlinger to help with your business contracts, we will ensure that each contract includes all necessary sections and clauses.
Contact Our Team for Business Contract Services
Contracts protect your business’s revenue, reputation, and intellectual property. Investing time and professional review of your contracts pays off. It is better than finding yourself in trouble because of the contract. At Swingle, Van Egmond, & Heitlinger, our firm will review your contract and ensure that all terms are clearly defined, as most contract disputes stem from missing or ambiguous information.
We will ensure that each line is in your best interest before you sign it. Contact us today at 209-522-2211 or reach out to us online to request a consultation.