One of the greatest challenges attorneys face when assisting small business owners is attempting to resolve problems with contracts that have already been signed. This checklist covers some of the basic principles that should be included in every business contract.
• Identify Parties – It is important to clearly identify the parties engaged in the agreement. You must identify the individuals signing the agreement and their official titles. In addition, you need to establish everyone’s authority to sign on behalf of the business.
• Responsibilities – Make sure the duties and responsibilities for each party are clearly defined. What goods or services are being provided? Are there specific deadlines for delivery? Nothing in your agreement should be left open to interpretation.
• Duration & Renewal – How long will the contract be in effect? What are the specific terms for renewal? Many contracts include automatic renewal if you fail to provide written notice of cancellation within 90 days of the end of the contract period. Make sure you take special note of any cancellation deadlines.
• Payments – Your contract should be specific about monetary transactions. When are payments due, who should be paid and how much or what percentage? Set deadlines and penalties for late payment.
• Fees, Expenses and/or Taxes – Some contracted projects and partnerships require fees, expenses or taxes to be paid. Make sure potential fees, expenses and/or taxes and the party responsible for making payment is clearly defined in your agreement.
• Confidentiality – It may be necessary to include a confidentiality clause in your contract, particularly if the other party will have access to privileged information. Losing important trade secrets or compromising client data can be costly.
• Dispute Resolution – Include in your contract rules for settling any disputes that may arise between the parties. Negotiation, mediation and arbitration may help you avoid going to court should a conflict arise.
• Determine Jurisdiction – If the various parties entering into a contract are in different states you should indicate which state’s laws will govern the contract. Indicating where the contract will be enforced will help avoid a dispute about jurisdiction should court action be needed. State laws may differ so it is important to consult with an attorney.
• Termination – Set the terms for terminating the contract. You may consider including failure to make payment or meet specific deadlines as a cause to terminate the contract. Setting specific terms and guidelines for termination is an important way to avoid disputes and confusion.
• Attorney Review – Do not sign a contract until it is thoroughly reviewed by an attorney.
• Notarize Signatures – Having all signatures witnessed by a notary protects the legitimacy of your contract. Should you need to go to court to enforce a contract and the signatures are not notarized, the other party may dispute their signature’s authenticity. If so, you will need to authenticate the signature, which will delay the legal process and increase costs.