Your transactional business contracts exist primarily to protect your business and the other companies or people with whom you do business. You have a written record of your agreement and your obligations to each other, which helps deter fraud and defaults.
From selling prices to establishing delivery schedules, your daily contracts can help you manage your business operations and make your company’s expenses more predictable. Of course, your contracts are only as good as the documents themselves. Using the same contract for every vendor, client or new hire could leave your business with inadequate protection.
There are several steps that you can take to protect yourself and your business when drafting a contract with a supplier or a client.
Make your expectations completely clear
The more detail you include in each contract and the more you tailor the contracts that you sign to your business’s current needs, the better that contract will protect you if there is some kind of disagreement with the other party.
Having a clear written record that you can both refer to can help you resolve minor conflicts and will also make it easier for you to hold the other party accountable if they breach the contract.
Include rules for conflict resolution
Would you prefer to go to mediation with the other party before you go to court? You can include causes in your business contracts that mandate alternative dispute resolution or other means of addressing conflict.
You can protect your company’s reputation and reduce how much it costs you to enforce your contracts if you are able to resolve your disputes with another party outside of civil court.
Impose penalties for the violation of the contract
One of the most straightforward ways to limit the likelihood of someone else breaching their contract with your company will be for you to consider creating a penalty as a deterrent. Imposing a late payment penalty is an example of how you can protect your business from other people failing in their obligations to you and also recoup some of the losses you may suffer because of that failure.
Ensuring that you include the right terms in your business contracts will make them more useful and valuable tools for your business.