In business, a well designed contract protects you from any unknown variables, much like an insurance policy. You pay for the policy, hoping that you’ll never have to use it. More specifically, a contract helps you manage and avoid potential risks. Due to the unpredictability of the business world, smart professionals create contracts to reduce any unnecessary costs and minimize all risks.
Why should you use a contract?
A contract is a legal document used between multiple parties to outline a business relationship. The contract becomes valid only when the parties involved agree to the terms and conditions by signing the document. It should detail the:
• expectations of the stakeholders;
• the relationship between all parties;
• the nature of the transaction;
• and the next steps of the relationship including any recourse in case of disputes.
It is often used for:
• During the hiring of freelancers/vendors/suppliers
• During the purchase of goods or services
• Real estate transactions
• Business partnerships
• Non-compete, non-disclosure or confidentiality agreements
With a contract between parties, all issues can be outlined in detail, thereby avoiding any problems that may happen in the future.
Things to be aware of in creating a contract
Don’t be vague, make sure the contract is detailed – The ideal contracts are detailed and focused. Make sure that the terms and conditions are simple, specific, and that avoids any uncertainty. The more specific you are in your expectations or terms, it becomes very clear on what is to be done by all parties and by what time.
Identify all concerns you have – Make sure that all your concerns are outlined and are answered. You don’t want to find out the hard way in a situation that could have been avoided.
Understand the laws – Make sure that you know your provincial and even local laws that can affect the contract. This is especially true for any real estate transaction where the laws change by province. It is best to consult a lawyer who is knowledgeable about your industry and can advise you on the proper stipulations.
Review the contract with a lawyer - Never sign the contract until you’ve gone over it with a lawyer. Many people make the mistake of only going to the lawyer after the agreement has been signed or when a problem came up.
A contract is meant to be used as a way to protect yourself and facilitate any business transaction. It creates a common platform from where all parties can move forward in consummating a business relationship. It also is used to protect yourself from any harm or legal problems and can be one of the best decisions you’ll make for your business.