Contracts help make business arrangements verifiable and enforceable. Business leaders sign contracts when they hire new employees or outsource company tasks to service providers. They execute contracts with clients or customers, landlords and vendors.
Ideally, contracts serve as a touchstone to help resolve disagreements about working relationships. They also make it possible for either party to hold the other accountable for failing to fulfill their obligations.
Unfortunately, the contracts that some business leaders sign do not protect them from controversy, litigation and major expenses. The three contract pitfalls below increase the likelihood of disputes. Thankfully, the assistance of an attorney can easily help their client avoid these mistakes.
1. Ambiguous contract terms
A lack of clarity is arguably the most common issue in many contracts. If either party fails to clearly explain their expectations, there could be disappointments that lead to disputes in the future. Creating a thorough contract that identifies each requirement established by each party helps reduce the risk of confusion and disappointed expectations. The inclusion of severability clauses can help ensure that the contract as a whole remains enforceable even if violations of any specific expectation or obligation occur.
2. Unconscionable contract terms
It is somewhat common for contracts to favor one party over the other. Each party signing an agreement should receive something of valuable consideration. Employment contracts are an example of a business contract that could include unconscionable terms. If the contract almost exclusively protects the employer while imposing obligations and restrictions on the worker, the courts may determine that the contract is unenforceable because it is so imbalanced.
3. Unenforceable contract terms
Sometimes, the expectations outlined in a contract are impossible to enforce in court. Requirements that are personal, rather than professional, or that violate regulations may not be enforceable in the event of a contract dispute.
The solution for each of these major issues is to partner with an attorney to establish custom contracts and to review each new agreement with a legal professional before signing it. An attorney can identify imbalanced or unenforceable terms. They can help business leaders recognize when the terms set are too ambiguous.
Securing assistance when reviewing, drafting or modernizing contracts can decrease the likelihood of contract breaches and disputes. Business leaders who seek legal support for contract matters are less likely to face litigation and operational disruption due to contract issues.