04 Nov Contracts Cannot Be an Afterthought for Small Businesses
Contracts form the backbone of all commercial activity. Every business has a contract with its clients. Some contracts are very basic, such as retail establishments: The business will give you X when you pay $Y. That is a form of contract-just a largely unwritten contract. Other contracts are a little more involved, for example a business to consumer services contract, such as HVAC maintenance, may include some details about payment, warranties, disclaimers, and similar information. Other entities dealing with sophisticated business relationships, such as B2B companies, should have a solid written contract for its client relations.
A contract cannot be an afterthought or a secondary consideration. Every contract is a description of a business relationship. A contract is essentially “private law” and provided the objective of the contract and its terms are not illegal on their face, courts will generally uphold the contract as an expression of how the parties want to operate. So, just like any personal relationship, the parties must have a clear understanding of the roles, rights, and responsibilities. Unlike personal relationships, those roles, rights, and responsibilities should not be shifting too often. Business owners can ill afford to assume the other parties know what your role or expectation may be. If the expectation or right is important to the way your small business operates, it is important enough to put into the contract.
For small businesses, disregarding contracts may cost you money and will certainly cause headaches down the road. Making a relatively small investment at the start of the business will not prevent headaches and save you money, it could actually be as stepping stone to early success that can be sustained.
Over the next several weeks, I will be publishing a series of posts on contracts and contract drafting with the goal of helping small business owners think about not just what they say in the contracts, but how they say it. Often the details of the deal get lost in the “legalese” of contract drafting.