The Top Five Contract Considerations for Business Owners

Contracts are the foundation of any successful business relationship. Whether you're engaging with vendors, customers, or partners, a well-drafted contract can be the key to a smooth and profitable collaboration. Having commercial litigation experience, the business attorneys at Thompson Legal know what kinds of terms can make or break a contract. Continue reading to explore the top five contract considerations that can significantly impact your business's success.

Please note that this post is not exhaustive, and every situation is unique. In the event that you have questions about your contracts, it’s advisable to speak with a licensed attorney. Contact Thompson Legal to schedule a discovery call with a professional business attorney.

1. Payment Terms

One of the most important parts of any contract is the payment terms. The amount, timeline, and method of payment should be spelled out. Clear payment terms are essential for maintaining your cash flow, reducing disputes, and ensuring that your business remains financially healthy.

Ensure that your contracts also specify any consequences for late payment or default. By defining these terms clearly, you can minimize misunderstandings and late payments, which can disrupt your business operations.

2. Industry-Specific Disclaimers and Warranties

Every industry has its unique nuances and potential liabilities. It's vital to tailor your contracts to include industry-specific disclaimers and warranties that protect your business's interests. If your business provides construction services, you may include an option for a lien or warranties against the fitness of building materials. If your business offers products or services, clearly outline any warranties or guarantees and include disclaimers to limit your liability in case of disputes. This section will also help manage your customers' expectations and safeguard your business from unforeseen issues.

3. Signed by Buyer

To make your contract legally binding, it's essential that it's signed by all parties involved. In order to hold a party to every term of a contract, you will need proof that they read and understood it. While it is still possible to collect if a benefit has been provided, requiring a counter signature reinforces your agreement. Make it a standard practice to require both parties' signatures for all contracts, whether they are for sales, partnerships, or collaborations.

4. Plan for the Breakup

While no one likes to think about the end of a business relationship, it's a crucial consideration. Including termination and default clauses in your contracts can help both parties understand how to exit the relationship if necessary.  Planning for the worst-case scenario can protect your business and maintain professionalism during a separation.

5. Intellectual Property and Confidentiality

Intellectual property and confidentiality clauses are particularly important in today's economy. If your business shares proprietary content, it's essential to outline who owns these assets and how they can be used. Additionally, confidentiality clauses protect sensitive information, trade secrets, and proprietary data from being disclosed to unauthorized parties. Safeguarding your intellectual property and confidential information is vital for maintaining your competitive edge.

Conclusion

Contracts are more than just legal documents; they are the foundation of successful business relationships. By paying attention to the terms, you can reduce legal risks and foster trust in your business. At Thompson Legal, our business attorneys understand the importance of well-crafted contracts. If you have questions or need assistance with contract drafting or review, don't hesitate to reach out to our experienced team. If you questions about your contracts, contact Thompson Legal to schedule a discovery call with an experienced Michigan business lawyer. 

This blog is for informational purposes only. It is not intended as legal advice. In the event you would like to speak with a business attorney about your case Contact Us at (734) 743-1646 to schedule a consultation.