The terms included in a business contract can guide how a company operates and may dictate how profitable operations prove to be. Contracts can give a business access to leased commercial facilities. They can ensure that companies have appropriate talent provided by independent contractors or employees. They can lock in vendor delivery dates and costs.
Some contracts have far more impact on a business than others. A potential merger with another organization, for example, could be a multi-million-dollar contract. An agreement with the new client, on the other hand, might simply represent a few thousand dollars. With that said, business contracts are typically complex, which makes it very easy for those representing businesses to make mistakes during negotiations. The following are some of the most common mistakes made during the negotiation of business contracts.
Failing to detail expectations
Making assumptions about shared priorities, standards or values is one of the biggest and most common mistakes people make during contract negotiations. Instead of talking in detail about specific issues, they gloss over what they expect from the other party or what they intend to provide because they assume that their standards or expectations are common knowledge. Taking the time to clarify specific needs and expectations can reduce the likelihood of disappointment and disputes later.
Failing to review details carefully
Particularly if a contract seems to include generic language rather than highly-specific details, it is easy to assume that there are no hidden risks or unsavory clauses integrated into the document. However, seemingly minor details within a contract can drastically alter how beneficial it is party signing. Going over the contract thoroughly with a lawyer prior to signing it is an important step.
Failing to address the possibility of conflict
People are often so eager to sign a contract that they focus on the positive instead of preparing for the worst-case scenario. The strongest and most protective contracts typically include terms that protect both parties in the event of a conflict. From clauses requiring alternative dispute resolution attempts before litigation to confidentiality clauses, there are many important inclusions that can protect both parties from damage. By expanding the contract to address the possibility of breaches, late payments and the disclosure of private business information, it is possible to maximize organizational protection while minimizing risk.
Rushing through negotiating a contract or signing an agreement without having an attorney review it first could be a mistake that has long-term negative implications for a business. Taking the time to negotiate a contract with appropriate terms and to clarify expectations can protect those hoping to do business with another party.