Creating a contract should be straightforward. It should outline each party’s responsibilities, compensation and dispute resolution.
Of course, if they were that easy, anyone could do them. Unfortunately, some people have tried to draft their own agreements and had to suffer the consequences. Contract formation is best left to the professionals; however, here are some common contract pitfalls to be aware of and avoid.
1. Spelling and grammar
One of the most common and easily preventable pitfalls is not using proper spelling and grammar in your contract. Contracts represent the professionalism and credibility of your business, and a contract riddled with spelling and grammatical mistakes indicates a lack of attention to detail. These types of errors can also potentially change the meaning of the contract and affect its enforceability.
2. Lack of clarity
Another common issue is not having clear and specific terms. Vague language can lead to differing interpretations, and failing to define key terms can create confusion over the contract’s meaning.
3. Incomplete agreements
A contract must include all the necessary terms, including the scope of work, compensation and deadlines. Don’t rely on verbal agreements; ensure they are documented in writing to avoid misunderstandings.
4. Improper drafting
A poorly drafted contract can create legal loopholes. Overusing complex legal terms can make the contract difficult to understand for non-legal parties. Furthermore, each contract should be tailored to a particular situation. Copying and pasting from other contracts can result in inconsistencies and errors.
5. Failing to address contingencies
Always plan for the unexpected. Not including clauses to address unforeseen circumstances can lead to disputes. A contract should also include termination clauses if one party needs to exit the contract.
6. Failure to obtain proper signatures
An unsigned contract may not be legally binding. If using an electronic signature, it’s important to follow legal protocols to ensure the contract’s validity.
Drafting a contract requires careful attention to detail and needs to be compliant with legal requirements. Engaging the assistance of someone to review and draft contracts can help ensure your contracts are effective and enforceable. A properly formed contract is the foundation for successful business relationships.
