How To Properly Define Terms In A Contract To Avoid Confusion

When you run a business, there are multiple things you must account for. 

Aligning strategies, finding partners, setting up offices, seeking clients and customers, you must have everything set to ensure that the business grows.

But is that enough? Have you thought about having a business contract? If not, it's high time that you work by the law and set up a contract for your business. 

But what is a business contract and how do you define terms in it to avoid confusion in the long term.

What Is A Business Contract?

Business contracts are legally binding terms meant for businesses entering into monetary trade. 

Irrespective of whether it is a product sold or a service provided, business contracts help outline the nature of the business, the expectancy, and the payment model among other legal clauses. 

As a legal document, it is expected that all of the parties abide by all that's written in the contract. Failing the above, they can be held liable in court. 

In the past, business professionals would enter into a discussion where each would mutually decide what's best, do a handshake under the impression that they would stand by it.

Even though the concept of verbal contracts still hold and are acceptable by the law, the present-day professionals prefer having the entire agreement written down in a legal document. 

This makes it easier for all to understand the business and mutual promises accordingly.

Tips For Drafting A Business Contract

There are multiple types of contracts and the terms added within each vary depending upon the type. 

Irrespective of the same, it is important to have all of the common terms mentioned in the best possible way to avoid any sort of confusion in the future.

Keep It Simple

True that the lawyers would embed terms such as heretofore and a party of the first part to make the contract as effective as possible, it is best advised to keep the terms as simple as possible. What's important is that the contract must be understandable. Keep paragraphs short and the sentences shorter.

Communicate With The Right Person

Before you hand over the contract to get it signed, make sure you are dealing with the right person in the organization, one who has both the knowledge and the authority to know what's best for the organization. 

Only who has a vested interest in the internal matters of the organization is in the position to negotiate and come up to mutual terms.

Specify And Mention Each Term Correctly

You would be surprised to know that people often misinterpret contractual terms. If the legal terms are not specifically defined, they might end up guessing the exact opposite of the actual definition. 

Hence, all of the key terms related to the business should be highlighted in the contrac, defined and also talked-about before accepting the deal. 

This assures that the parties are on the same page, agreeing to everything that is being said/is written in the document.

Above all, make sure the contract lists out the payment methods, the structure, and the mode of the same. 

The duration of the contract must be added gso all the parties have an idea of how long the contractual engagement will last. You should also have a clause where you mention a basis for terminating the contract.

Legal Terms To Take Note Of:

Termination: Circumstances when the contract is forced to end.
Breach: Acting in a manner that is not acceptable and against the terms mentioned in the contract.
Expiration: The day when the agreement ends legally

In the end, keep the contract confidential, and be sure that it is in accordance with state law to avoid confusion.

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Yoel Molina, Esq. (AKA “Mo”)

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