Benjamin Franklin stated “an ounce of prevention is worth a pound of cure”. In the commercial world, written contracts are the ounce of prevention that helps to reduce costly disputes.
A carefully drafted written contract serves as an important point of reference for both you and the other party. Having a written description of the rights, obligations and responsibilities prevents potential confusion between the parties. It helps to avoid ambiguity and uncertainty and there is less likely to be miscommunication and misinterpretation.
A good written contract clearly states the responsibilities of all parties, often setting out things such as the outcomes expected, performance measures, timeframes and financial arrangements. Whilst it may contain some “legalese” (which often protects and/or clarifies the positions of the parties), it does not need to be complicated. In fact, the plainer the English, the better.
Whilst lawyers will argue (rightly) the importance of ‘boiler plate’ clauses (standard provisions found in most contracts covering legal matters), if you do not have a full description of the parties’ commercial responsibilities, there is every chance that confusion and misunderstanding will arise.
As a minimum, make sure your contracts include:
Description – For example, often one party is providing products/services to another for cash. A full description of the products/services should be set out including timelines and place(s) for delivery etc;
Price – Include any discounts, installation charges, delivery charges and other expenses;
Price adjustments – If you are entering into a long-term contract, consider how price adjustments will be handled;
Payment and credit terms – State when payment is due. If payment is not required immediately, spell out payment terms, including any discounts for early payments or interest charges for late payments.
This should not be relied upon for legal advice. If you would like any further information or advice please email firstname.lastname@example.org.