It’s Time to Close the Loopholes in Your Business Contracts
Business contracts dictate internal and external practices. Ideally, your contracts should provide you and your partners with the peace of mind needed to focus on growing your business and preparing for the future ahead.
At the end of the day, a contract is only as good as its weakest point. Whether a litigious challenge comes from inside or outside your company, it’s imperative to consistently review your contracts and ensure there are no loopholes that can doom your business.
Don’t Rely on Generic, “One-Size-Fits-All” Terminology
Your contracts need to reflect the reality of your business. Simply heading online and finding a DIY contract will miss the nuance that your business deserves. Situations where a generic contract will suffice, but even then, you should make sure the wording is clear and specific to your circumstances. You cannot afford to be vague in a business contract.
Example: You Google a generic operating agreement[LINK TO APRIL BLOG 1] and just fill in numbers and names for all partners to sign. This exposes your partnership to immediate litigation should a partner recognize areas of your business that are not properly addressed.
Avoid or Amend Terms That are Impossible to Perform
All of the named parties in your contract have to be able to reasonably meet the terms in order for the contract to actually be enforceable. Many contracts have fallen short of this and ended up being thrown away in a courtroom. This can mean that the parties were not able to perform certain terms at the time of signing or that circumstances have changed since the signing but terms were not adequately updated to reflect those changes.
Example: You retain a law firm as legal counsel but want to specifically work with one member of that firm on all matters pertaining to partnership disputes. When that member leaves the firm, you must update the language of the contract or understand that these terms are no longer enforceable.
Be Honest
Say you are trying to grow your business fast. You are not going to do this by misleading partners, vendors, and financial institutions. You need to be honest about the assets, cash on hand, employees, and other key details of your business. Trying to mislead another party in the hopes that they will not find out or that you can fulfill the terms before they notice is setting yourself and your business up for failure.
Example: You want to secure a loan but do not have the capital to reach the amount you actually need to get the job done. Lying about assets or claiming to have investors that are actually just in the negotiation stage can land you in significant legal trouble.
Define What a Breach of Contract Is
Contracts can be breached in a number of ways – oftentimes obviously. However, there could be certain circumstances that can be considered a breach of this specific contract. Clearly outline any uncommon situations that can be considered a breach of contract to protect yourself and ensure the integrity of the agreement.
Example: Your construction company signs a deal with a supplier for a project but wants to contractually ensure that all supplies are made in the United States. Ensure that it is made clear that using or ordering supplies from another country would be considered a breach of contract.
Work with an Experienced Attorney
Working with a Florida business attorney on any new contracts is imperative. Having that attorney review all current contracts to ensure there are no loopholes or to update the terminology could be even more important.
Example: You contact the Law Office of Ray Garcia before anyone signs on the dotted line.
Law Office of Ray Garcia, P.A.
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