The success of your Maine-based small business depends to a great extent on the quality of the contracts you sign. A good contract protects everyone, and a bad contract could ruin you.
Every time you promise to exchange services or property, you create a contract, either written or unwritten. Oral contracts present several problems. They can be ambiguous, difficult to enforce and hard to prove in court.
To help eliminate potential disputes, contracts of choice should always be written. They contain precise terms about the people or companies involved, the property or services offered, and of course, the agreed-upon price. Contracts may also include clauses outlining the terms of defaults, indemnities and exemptions.
Filler & Associates has come up with some key points to keep in mind before you sign any contract:
- Put it in writing. If an agreement is reached over the phone or in a meeting, write it down with both parties signing as soon as possible.
- Like the terms. Remember, you’re the one that has to meet the obligations. If the proposed terms are unacceptable, make a counter-offer.
- Cover the bases. Don’t leave anything out of the agreement. And if the deal is based on an earlier verbal agreement, be sure the written terms match. Include options, consequences, and possibilities. Don’t fail to address an issue because it’s sensitive.
- Keep it clear. Define ambiguous terms in simple language and don’t complicate things unnecessarily.
- Be consistent. Legal writing isn’t creative writing. You don’t want royalty in one paragraph, license fee in another, and use fee in another.
- Duties and obligations. Include an as detailed as possible description of the duties and obligations as well as the deadlines for performance.
- Reps and warranties. A warranty is a legal promise that certain facts are true. Typical representations or warranties concern issues such as ownership of goods and the right to sell or assign them. Warranties can also include intellectual property ownership rights.
- Termination. This ensures that either party can end the contract under certain circumstances. Generally, termination clauses describe breach of contract events that trigger the right to terminate. The provisions also describe how to give notice that you’re going to exercise the right, and whether the breaching party has an opportunity to remedy the breach.
- Remedies and arbitration. A remedy clause outlines the non-breaching parties’ rights when a contract is violated. In sales contracts, remedy clauses are usually designed to limit the seller’s liability for damages. An arbitration clause states that disputes must be settled through arbitration rather than litigation. It generally includes the name of an organization that will conduct the arbitration (the American Arbitration Association, for example), the city where it will be held, how arbitrators will be chosen, as well as who will bear the cost.
- Merger clause. A merger clause helps prevent evidence outside the written document from being admissible in court to contradict or supplement the terms of the written agreement.
For more information about contracts and their different components, contact Filler & Associates.