Avoiding Key Contractual Mistakes

Businesses utilize contracts because they outline the responsibilities of two or more parties. Consider the small business that relies on a third party for the raw materials they use to create their product. This relationship needs to be governed by a contract because it protects both sides if one fails to fulfill their obligations. Using this example, their contract may address the following components:

What is being exchanged?
Confirmation that each party has agreed to the terms of the contract.
Proof of the confirmation (e.g., signatures).
Each party has the legal capacity to understand the terms of the agreement.
The contract is written in accordance with local, state, and federal laws.

Before we elaborate further on some common mistakes businesses make regarding contracts, we will identify that the biggest failure is not having one. Are oral agreements valid and binding in New York? They are, but you still have to prove the existence of that agreement. Even if your attorney can track down bank records and emails to show that a “meeting of the minds” occurred, how much will that cost you in legal fees? And what are the odds that everything we listed above is addressed in those emails? It’s unlikely. That is why you meet with a business law attorney who can draft a contract using the precise language that protects you and your interests.

Don’t Take Shortcuts

Imagine that you learn that you must give a speech in front of thousands of people, and you decide you want a new suit. For the sake of the example, pretend that you will only get to try it on moments before the speech. Do you pick one out online or have a tailor come to your house and take measurements? Choosing the first one is the equivalent of using a DIY contract template. Option B resembles having an attorney draft the contract that meets your business’s needs. Though you may never have to test the contract’s strength, much like the suit you couldn’t try on, you have the confidence in knowing that it is done correctly by a skilled professional.

The other pitfall people fall into is signing a contract they don’t understand fully. Even if you are the third-party vendor and a business asks you to sign a contract their attorney has drafted, you don’t need to rush to sign it. For those who do not write or study contracts, reading one can feel like learning trigonometry in a foreign language that you don’t speak. Allow an attorney to read the contract and explain the terms so that you have a command over what you are committing yourself to.

If the other side pressures you to sign it before you have time to consult legal counsel, what long-term benefit do you think you will gain? Don’t gamble with your future by rushing to sign a contract. Lastly, you can adjust the terms of the agreement to those that are more favorable. There’s no guarantee that the other side will agree, but at least you can consult an attorney and ask them whether they recommend that you proceed with the contract.

Contracts Are a Means to an End

With over 35 years of combined experience, Drucker & Mattia, PLLC, we understand that your contract is a means to achieve a specific business objective. Whether you need assistance incorporating a business, choosing an entity, or are ready to purchase or sell, we will support your efforts. Contracts are merely a tool to get you to a desired end state. Contact us today to schedule your free initial consultation.