Should I have a Contract in Place?

By Alex Smith

The demands of running a business are such that you likely seldom pause to ask yourself “Should I have a contract in place?”. Although this question is usually not top of mind, the answer is undoubtedly almost always yes. Whether you’re acquiring goods from a supplier, providing services to a client, leasing property from a landlord, or seeking help from a contractor or consultant, a written contract is essential to protect you throughout these business relationships. Contracts can often be drafted and negotiated with little delay or deviation from the business at hand and will allow you to navigate a number of issues which may arise in the course of the agreement.

Payment Terms

A commonly disputed element of any commercial relationship is payment. Although we may think we are being certain in our discussions surrounding payment, thorough and well-drafted payment terms can avoid these disputes and help protect one’s business interests. With a proper contract in place, you can clearly set forth the method, amount,timing, and other key terms related to payment.

Obligations

A written contract can also guarantee that you are receiving the deliverables that you asked for. A detailed description of each party’s obligations, product specifications, services to be provided, etc., will provide you with documentary evidence of what you have been promised, or, conversely, clearly convey to your customer what you are providing. Having this information in writing is invaluable to ensure you get what you bargained for or for setting forth the limitations of what you will provide.

Limitation of Liability

Absent a written contract, the liability among contracting parties is potentially limitless. Injury to the other party or to third parties may arise in a number of ways, including direct bodily injury or property damage, violation of relevant statutes, and intellectual property infringement, among other ways. A written contract can spell out a firm amount at which your liability to the other party will be capped, or can exclude certain categories of damages altogether.

Termination

Given the unpredictability of operating a business, you may find that you no longer want or need the services you are receiving (or providing). This may be the result of changing costs, a change in business strategy, or dissatisfaction with the business relationship. A written contract can provide you with the flexibility to terminate a contract on favorable terms and avoid costs and delays that may arise upon contract termination.

What’s Next?

Although some contracts will need to be tailored to unique situations, many businesses will find that one standard contract or set of standard contracts can be used in a majority of their service offerings, allowing for a streamlined contracting process with customers.

If you are interested in having a standard contract drafted for your business, please contact me at (612) 361-6394, alex@smithpllcmn.com, or through our web portal.