Focused On Business Law

Attorneys Sara Bradley, Marinda Neumann and Lindsay Nakagawa.

Avoid these three common mistakes in business contracts

On Behalf of | Dec 19, 2022 | Business Law

Clear and comprehensive contracts are the foundation for any business. However, much can go wrong when owners attempt to build an agreement from scratch or are in a hurry to close a deal without knowledgeable legal guidance.

Mistakes often happen in these situations, which can jeopardize a contract’s validity, potentially leading to breaches and possible litigation. While many pitfalls exist, here are three common mistakes that some businesses make during contract management.

1. Imprecise language

Some organizations believe vague wording and ambiguous definitions protect them. However, the strategy often backfires when the other party challenges the contract’s validity. Contracts should always contain clear and precise language.

2. Undefined goals

Just as vague language can jeopardize a contract, failing to clearly define each party’s goals can encourage future challenges. While the project’s scope may change later, moving the goalpost, so to speak, amendments should be added at that time instead of unclear wording in the initial contract.

3. Not outlining consequences

Even clearly written contracts can hinder a business when consequences aren’t specified after one or both parties don’t deliver on the terms of the agreement. For example, penalties for missing a deadline should be clearly stated in the contract.

Several studies conclude that close to half of all business failures are related to poor contract management.* Business contracts are crucial as they cover virtually everything related to a company, from partnership and employment agreements to terms outlining vendor relationships and leases.

Many organizations must also draft restrictive covenants to protect intellectual property and trade secrets. Often, their success is tied to non-compete clauses and nondisclosure agreements, which must be carefully crafted. That’s why experienced legal guidance is advisable.