One of the first pieces of advice people give small business owners is to be careful about their contracts. Recognizing that you need a formal contract for most business agreements is important, as is ensuring that your contract contains all of the necessary terms and information.
Unfortunately, even when you are proactive about protecting your company, contract disputes can still arise. Identifying some of the more common contract disputes can help you prevents them from affecting your business operations.
Disputes about timing
Whether you have a contract with a vendor supplying raw materials to your industrial facility or with a customer who has hired you to remodel their bathroom, it is critical that both parties include all of their expectations in clear language in the contract.
What seems like a reasonable time frame for one party may seem like a breach of contract to the other. Assuming that someone understands how long it takes for you to go through a shipment of materials or to renovate a bathroom might lead to real conflict in the future.
Conflicts about pricing or compensation
If you sign a contract with a supplier, you expect them to adhere to their quoted price or to the current market price for the materials you need. The same is true for clients that you have provided with an estimate regarding the cost of your services or products.
Including not just the initial quote or estimate but also terms for how to adjust pricing if things change before the completion of the contract can help reduce monetary disputes.
Disputes about how binding or long-lasting the contract is
If you hired an employee to work in your engineering department, you will likely have them sign a non-compete agreement to protect your company. If you sign a contract with the supplier, you want to know how long you can depend on their current pricing model. Including information about how long an agreement lasts is important and can impact how enforceable the contract is later.
Disagreements about how to resolve a conflict
Contract disputes are a common occurrence, which means they are a foreseeable issue that you can address while initially executing the contract.
Including rules about how either party can resolve a dispute could help you keep your issues out of court and keep the process of solving a dispute more affordable for you. Failing to address a possible contract breach in the document before you sign it could mean more difficulty enforcing the contract later.
Identifying risk factors for major contracts involving your company can help you draft strong contracts and enforce the ones you already have.
Before signing a contract, always have your attorney review it first!