Is Your Business Contract Bulletproof? 5 Ways to Ensure It Is

Contracts are absolutely essential to any business. They’re the foundation of successful business relationships, but having the right contract is key. A well-written contract clearly lays out everyone’s responsibilities, what’s expected of each party, and how to handle disagreements, all while staying within the bounds of the law.

However, knowing you need a good contract and actually creating one are two different things. Many business owners make critical mistakes that can really hurt their business. Here are five of the most common contract blunders and how you can avoid them:

Not Putting it in Writing

A verbal agreement can be a recipe for disaster. Memories fade, and disagreements arise easily when things aren’t written down. In Nigeria, and many other places, certain contracts must be in writing to be legally enforceable. This includes things like real estate sales, agreements lasting longer than a year, and sales of goods above a certain value. While some verbal agreements might be legally binding, they’re incredibly difficult to prove. A written contract protects everyone involved by clearly documenting the agreed-upon terms.

Incomplete or Vague Terms

Ambiguity is the enemy of a good contract. If the language is unclear or details are missing, it opens the door to misunderstandings, disputes, and even lawsuits. Clarity and specificity are paramount. Nigerian courts, like those elsewhere, interpret contracts based on the plain meaning of the words. But if the language is vague, they might look at other evidence, like what the parties said or did, to figure out what they intended. Common drafting errors include using ambiguous language, leaving out crucial details like payment schedules or delivery dates, and including contradictory provisions. To avoid these problems, be meticulous. If you’re unsure, get help from a lawyer specializing in business contracts.

Ignoring or Misunderstanding Your Obligations

It sounds obvious, but you have to understand what you’re agreeing to! Ignoring or misinterpreting your contractual obligations can have serious consequences, including breach of contract lawsuits. Failing to meet deadlines, missing payments, or not performing as promised are all common pitfalls. If a breach of contract occurs, a court might award damages to the other party. So, read every word, understand your responsibilities, and seek legal advice if anything is unclear.

Overlooking Key Legal Provisions

Certain legal provisions are essential for a solid contract. Omitting them can create significant problems and even make the contract unenforceable. Think of things like:

• Choice of Law: This specifies which jurisdiction’s laws will govern the contract.
• Dispute Resolution: This outlines how disagreements will be handled, like through arbitration or mediation, potentially avoiding costly court battles.
• Severability: This clause ensures that if one part of the contract is deemed invalid, the rest of it still holds.

These provisions are generally enforceable if they’re clear and specific. But it’s crucial to have them drafted correctly by a legal professional.

Not Seeking Legal Counsel

One of the best investments you can make is consulting with a business attorney, especially when dealing with contracts. They bring expertise, can spot potential problems early on, ensure compliance with the law, and help make sure your contracts are legally sound and enforceable. A good lawyer can be your advocate throughout the entire contract process.

What if a Dispute Arises?

Disputes can be disruptive and expensive. Here are some ways to resolve them:

• Negotiation: A direct conversation between the parties to find a mutually agreeable solution.
• Mediation: A neutral third party helps facilitate communication and find common ground.
• Conciliation: Similar to mediation, but the third party may also suggest solutions.
• Arbitration: A more formal process where a neutral arbitrator hears both sides and makes a binding decision.
• Litigation: Going to court, which should ideally be a last resort.

Ideally, you want to find a solution that preserves relationships and minimizes costs. Disputes can damage relationships, reduce productivity, and put your business at risk. Finding constructive and efficient ways to resolve them is crucial.