Whether your business is in its beginning phases or is an established organization, contracts and business agreements will play an integral role in its day-to-day operations. Every business aims to avoid lawsuits as much as possible, as they can quickly derail your budget and timeline — and can even threaten your business’ livelihood altogether. Unfortunately, many professionals still make casual or rushed agreements every day, often leading to those expensive lawsuits that can put them out of business.
Beware of Handshake Agreements
Author Mark J. Kohler published an article on Entrepreneur.com titled “How a Handshake Can Destroy Your Business.” He claimed that a business doesn’t need to worry about “if a partner, vendor, or customer is going to drag you into a lawsuit” — but when.
What many professionals don’t consider is that emails hold up in court as binding contracts, and that simply coming to a verbal understanding can bind a business in a contract they never meant to enter. At the same time, some professionals assume that, since emails can be viewed as contracts in court, they don’t need to draft up a contract with a business partner if all the details are covered in email. Kohler outlines the key elements that must be present in every contract in order to protect your business:
- Basic terms regarding the delivery of goods or services. These include the time, place, and price of the project and should outline how losses would be handled.
- Details regarding the attorney fees for the non-breaching party.
- A clause regarding mediation or arbitration (so that the parties can seek a settlement without necessarily going to court).
- Details regarding which state’s laws would apply to the contract in the case of a dispute.