Businesses run on contracts, but not all of these agreements are created equally. Contracts are essentially agreements between two or more parties that outline the rights and obligations of each party. When a contract is not drafted properly, it will not offer the protection business owners and others require. It is for this reason that it is important to speak to a business lawyer who can help you prepare the contract that is right for your business. A lawyer will also help you avoid the four most common mistakes made when non-attorneys draft their own business agreements.
The Agreement May Not Mirror Your Intentions
Many business owners are tempted to simply find an online template that is suitable for the type of contract they want to create. However, there are many problems associated with these forms. The first is that these templates are not always prepared by an attorney who is familiar with the law. Even when they are, these contracts are also not state-specific and so may not include language or provisions required by California contract law, or include terms that violate state law.
Even when online contract templates are prepared by an attorney, they may include legalese or provisions that are not easy to understand. These types of forms are often very long, and many people do not entirely understand what they say. They simply trust that the contract provides the necessary protection, and that is not always the case. In the end, these types of contracts can actually hurt a business far more than they help it.
For example, you may have a contract with a vendor that is going to supply you with inventory necessary for your business. You may assume the vendor will deliver the goods by a certain date, such as your opening date, but the contract does not include that date. If you do not have the necessary supplies to open your business, you will not have any way to remedy it because the contract does not specify a date. When working with a business attorney, they will always fully explain what the contract states, and ensure you know what you are signing and the terms to which you are agreeing.
The Contract May Not be Enforceable
It is a common misconception that for a contract to be considered enforceable, it must only be in writing and contain signatures. That is not necessarily true. For example, non-compete contracts are generally not considered enforceable under California law, which is something many people do not know. If you include a provision within a contract that states an employee cannot leave your business to go work for a competitor, particularly if that business is in another city or state, the entire contract may be deemed unenforceable. When a contract is not enforceable by the courts, a person cannot take another party to court to sue for damages for breach of contract and they may not have any recourse.
There are many other reasons contracts are deemed unenforceable. For example, if another person enters into the contract on behalf of a business, but they do not have the authority to do so, this can also cause the contract to be unenforceable. Many people do not fully understand the many laws and rules that apply to contracts and that can render them unenforceable.
Additionally, contracts may contain ambiguous language that are interpreted in a number of different ways by the court. While you may think the language is quite clear, a judge may think differently and make a ruling that is not in your favor. A business attorney will ensure a contract will be deemed enforceable and contains clear language that cannot be misinterpreted against your best interests.
Your Legal Interests May Not be Protected
You may know you need a contract, and you may even understand the most important terms you want included in it. However, you may not consider all the issues and that could potentially expose you to certain liability.
For example, you may enter into a contract with a vendor that will supply your business with important goods and services necessary to run your business. You may agree to pay them at a certain time for those goods and services. If you run into an unforeseeable problem, such as if your business burns down, you may not be able to pay the vendor. If you do not include a provision that allows you to back out of certain terms of the contract, you may still be liable for those payments at a time when you can least afford them.
A business lawyer will identify these potential issues and include language within the contract that will protect the interests of you and your business now, and in the future.
You May Not Know How to Respond to a Breach
While unfortunate, it is true that parties sometimes breach a contract. When a person breaches a contract, it means they have not fulfilled the obligations outlined within the agreement. A breach of contract is often extremely devastating to a business, which is why the law provides certain remedies. One of those is filing a lawsuit and taking the breaching party to court.
Many people do not know how to navigate the complex legal system after filing a lawsuit against someone. This sometimes results in a mistake being made, which can devastate a case and not provide the remedies for which a person was hoping. For example, the statute of limitations on breach of contract in California is four years when the contract was written. Oral contracts are governed by a statute of limitations of just two years. Under this law, if the statute of limitations expires before you file your lawsuit, you forfeit your right to any damages or other remedies for which you may have been eligible.
A business attorney will know how to file a lawsuit properly and take the breaching party to court to recover the full amount of damages you deserve. A business attorney can also advise on alternative dispute resolution methods such as arbitration or mediation that can avoid a costly and time-consuming legal battle.
Call Our California Business Lawyer Today for Help with Your Contracts
When a business contract is not drafted properly, it will not protect the interests of you or your business to the full extent allowed by the law. Improperly drafted contracts will also be much more likely to result in a dispute and that can lead to unnecessary costs and time litigating the matter in court, or finding an alternative dispute resolution method.
At Klein Law, our knowledgeable Santa Monica business lawyer can help you and your business avoid the burden an improperly drafted contract can cause to your bottom line. Attorney Klein will ensure that the most important terms are included in your contract, and that none of your business contracts contain ambiguous language. Before you draft an agreement, call us today at (310) 295-2261 to schedule a consultation and to learn more about how we can help.
