Understanding, Creating, and Negotiating Business Contracts
You can never underestimate the importance of signing formal contracts in business. Contracts spell out the rights and obligations of all parties. By signing a contract, you protect your business by having a reference point should any legal dispute arise down the road. No matter how long you’ve known and worked with the other party, contracts are an important prerequisite before any engagement. In fact, you should involve a legal adviser to help draft or interpret already drafted contracts before appending your signature.
Tips for Creating Contracts
Include as Many Details as Need Be
One of the best things to do when creating contracts is to include as much detail as possible. First, anticipate that disagreements will arise. Include clauses on how to resolve such disputes, first amicably and then through other means. Both parties should also have a right to terminate the contract, and the contract should provide for a procedure to do so. For your own sake, ensure that terminating the contract is not unreasonably difficult.
Prepare for Negotiations
Before drafting the final version of the contract, there will be negotiations. Prepare sufficiently before entering such negotiations. Have written notes on the most important issues for you and how you’d like them addressed. Do enough research to ensure you have your facts and figures right. There is no need to rush negotiations, especially when a contract will run for several years.
Understand the Other Party’s Motives
Part of your preparation should be to understand the motives of the other party. Are they just angling for the lowest prices? Are they looking for a reliable business partner? Doing your research on them will help you have answers to the questions they may have. You’ll also be able to give them reassurances about their worries.
For instance, if their greatest worry is about your company’s capacity to handle a large volume of business, make commitments that will convince them you will improve and maintain such capacity.
Pick the Right Team and Tools
Ensure you have the right team and tools to help you throughout the process. You may need to pay for premium data or market intelligence from research companies to help you in your preparation. This could be worthwhile if you are a new entrant in the market.
Again, you could use past contracts to help you draft the new one. Past contracts will help you remember important clauses and the proper language to use. You can use a tool to extract PDF pages to cut pages or sections from a previous contract for inclusion in your new contract. You can also rearrange pages or add comments and images.
Join Your Local Chamber of Commerce
Interacting with business owners places you in a network from which you can draw advice on business negotiation, conflict resolution, and market intelligence. Search for and join your local chamber of commerce to benefit from the community of entrepreneurs and business leaders in your area.