Top Business Contract Mistakes and How to Avoid Them

 Posted on October 26,2021 in Business Law

Contractual agreements are essential for many businesses, and a company may enter into multiple types of contracts with vendors, suppliers, partners, clients, or other parties. While contracts can provide important protections, ensuring that both parties meet their obligations, they can also cause significant problems if they contain mistakes or omissions. By working with an attorney to draft, negotiate, and review contracts, a business can ensure its rights and interests are protected in these types of agreements.

Avoiding Contract Mistakes

While a business may become involved in multiple types of agreements, a verbal agreement or a basic written agreement will not provide it with the protections of a legal contract. To protect its rights and interests, a business will need to make sure a contract is tailored to the unique circumstances of the company and the agreement being addressed. Some of the most common mistakes made in business contracts involve issues such as:

• Recitals - A contract will usually begin with a preamble that identifies the parties, as well as recitals that provide background information about the purpose of the contract. Failure to include this information may make it difficult to enforce a contract if disputes should arise. 

• Consideration - A contract must provide a party with something of value in return for agreeing to the terms of the agreement. For example, a vendor contract may state that a certain amount of money will be paid in return for providing services. Failure to include terms addressing consideration may cause a contract to be unenforceable.

• Force majeure - A party may encounter unexpected issues that prevent them from fulfilling their obligations. If these issues occur because of circumstances that are out of a party’s control, such as a natural disaster, a force majeure clause may release them from liability for breach of contract. Failure to include a force majeure clause may place a company in a difficult position if it encounters these types of issues.

• Limitations on liability - A contract may include clauses that limit the type and amount of liability that will apply in cases where one party causes financial losses for the other party. Without these clauses, a company may be held liable for damages that exceed the value of the contract itself.

• Termination - A contract should include provisions that allow either party to terminate the agreement in certain circumstances. Without these terms, a party may be obligated to continue upholding a contract, even if it would not be financially feasible to do so.

• Dispute resolution - Litigation of contract disputes can be very costly and time-consuming, and a business may wish to avoid resolving these issues in court when possible. A contract may specify the methods used to resolve disputes, such as requiring the parties to use mediation or arbitration. Litigation may be unavoidable if these terms are not included.

Contact Our Elgin Business Contract Lawyers

At Ariano Hardy Ritt Nyuli Richmond Lytle & Goettel P.C., we work with businesses to address issues related to contracts, including negotiating favorable contract terms and addressing contract disputes. To get legal help with these matters, contact our Kane County contract law attorneys at 847-695-2400 and schedule a free consultation today.

Sources:

https://thebusinessprofessor.com/en_US/122296-law-transactions-amp-risk-management-commercial-law-contract-payments-security-interests-amp-bankruptcy/organization-contract

https://www.pon.harvard.edu/daily/dealmaking-daily/business-contract-mistakes-and-how-to-avoid-them/

https://www.concannonbc.com/business-contract-mistakes/