Whether you’re signing a new employee to a job opening, entering into a relationship with new business partners, or hiring contractors to finish a job, business contracts are at the core of working together to get things done. In business, the difference between a well-written business agreement and a poorly worded contract is often the difference between success and a future full of problems and potential litigation.
In order for a business contract to be as effective as possible, some simple steps need to be taken first. Once you’ve finished with the basics, it is time to consider other recommended practices while drafting your contracts.
Have All the Basics Been Satisfactorily Covered in the Contract?
Before worrying about anything else, you must first see the fundamentals of your business contract. Your contract might differ from another company’s in many ways, but almost all business contracts share some of the minimum basics.
Ensure that the contract includes these features:
- Date that the contract is signed.
- The names and signatures of all the key players involved.
- The date that the contract goes into effect and the date it is set to expire.
- Consequences and damages in case there is a breach of contract.
- Payment amounts and terms.
Is Simplicity or Complexity Recommended?
You want the contract to be as all-encompassing as possible, but you should endeavor to keep the wording and sentence structure simple. You do not need to fill your employment contract with flowery prose or technical legalese. Rather, keep it simple and easy to understand. The last thing you want is to create confusion and have somebody sign a contract that they do not fully understand.
Are the Duties and Responsibilities Clearly Understood?
Make sure the business contract clearly outlines the agreed-upon services that you expect the signee to take on. When drafting the contract, do not assume anything. Rather, put it all in writing. You may assume that the new employee fully understands their role, but they may see things a different way. Don’t leave it up to chance. Clearly state all parties’ duties, functions, and responsibilities with the contract signing.
What Essential Clauses Have You Written into the Employment Contract?
While we want the contract to read as inviting and encouraging to the party who is asked to sign it, there must be certain clauses in the contract that they may feel threatened by. This is part of doing business, though. In addition to clearly identifying each other’s roles in the business arrangement, you must also identify what happens when someone fails to fulfill their responsibilities.
Essential clauses to consider when drafting your business contract include:
- Arbitration Clause.
- Breach of Contract Clause.
- Confidentiality Clause.
- Dispute Resolution Clause.
- Force Majeure Clause.
- Indemnification Clause.
- Liability Clause.
- Termination Clause.
Have You Considered a Restrictive Covenant Like an NDA?
Restrictive covenants are well-liked by employers, but their employees are not often quite as fond of them. Examples of restrictive covenants include non-disclosure agreements (NDAs), non-compete clauses, and non-solicitation agreements.
An NDA is a confidentiality clause that requires the party not to share specified trade secrets and other matters with the public or the company’s competitors. If the trade secret got out, your company might experience financial losses as a result.
A non-compete agreement requires that a former employee not work for a direct competitor in your field for a specified time.
A non-solicitation clause prevents former employees from poaching workers from your talent pool or soliciting your customers to follow them to a new company.
Restrictive covenants can be challenging to enforce, and you are strongly advised to work with an attorney.
How Will You Resolve Disputes with Your Employees, Contractors, and Business Partners?
When drafting a contract, you need to be mindful of minimizing the potential risks to your business. Disputes and disagreements are inevitable in all business relations, so it is wise to take time and carefully explain how you will seek to solve such conflicts in the future. Without dispute resolution being carefully detailed, you run the risk of future litigation.
Alternative dispute resolution options like mediation and arbitration are usually considered sound strategies, but your lawyer can help you arrive at the option that is most well-suited to your business arrangement.
Have You Included a Definition of Terms?
Including a definition of terms can be a useful guide to those unfamiliar with certain words and terms that may appear in an employment contract. The segment including the definitions of terms may appear near the first pages of the contract, but it can be among the last things that are written and added.
Has a Lawyer Reviewed the Contract?
In the most ideal circumstances, both your legal representatives and the legal representation for the signee should review the contract before anything is signed. But you cannot control who the future employee or business partner brings to the table in a contract signing. However, you can (and should) have your legal team review the documents and change any ambiguous wording before putting the contract on the table. Many lawyers devote their careers to business law and know where to be watchful for common mistakes made in drafting even the most important contracts.
Schedule an In-Depth Case Evaluation with Our Experienced Business Law Attorneys
Lankford Law Firm has extensive experience helping large and small Florida businesses draft important contracts. We would be proud to have a part in helping your business flourish and grow as you sign new talent to your company roster and begin promising new partnerships.
To learn more about the legal services our firm offers, please contact our Central Florida law offices at 850-888-8992.