Contracts are the foundation of every business relationship — with customers, vendors, employees, partners, and lenders. A well-drafted contract protects your interests, clarifies expectations, and provides a roadmap for resolving disputes. A poorly drafted contract exposes your business to liability, financial loss, and litigation.
Why Written Contracts Matter
Oral contracts are generally enforceable but proving their terms in court is extraordinarily difficult. A written contract eliminates ambiguity and serves as a reference document. The process of negotiating and documenting an agreement also forces the parties to address potential issues before they arise.
Essential Contract Provisions
1. Parties and Recitals
Identify all parties by full legal name, entity type, and state of formation. Verify that the person signing has authority to bind the entity.
2. Scope of Work or Obligations
Describe obligations with specificity. Vague descriptions lead to disputes about whether obligations have been fulfilled.
3. Payment Terms
Specify amount, currency, due date, payment method, and late payment penalties. Address whether prices are fixed or subject to adjustment.
4. Term and Termination
Specify duration, termination for convenience, termination for cause, cure period, and effect of termination.
5. Representations and Warranties
Statements of fact that induce the other party to enter the contract. If false, the injured party may have claims for breach and fraud.
6. Indemnification
Allocate risk by requiring one party to compensate the other for specified losses. Key terms include scope, procedure, and limits.
7. Limitation of Liability
Cap the amount one party can be required to pay. Common structures include caps at contract value and exclusion of indirect damages.
8. Confidentiality
Prohibit disclosure and use of confidential information except as permitted by the contract.
9. Intellectual Property
Address ownership of IP created under the contract, licenses granted, and pre-existing IP rights.
10. Force Majeure
Excuse performance when circumstances beyond a party's control make performance impossible.
11. Dispute Resolution and Governing Law
Specify which state's law governs, where disputes will be resolved, and whether disputes will be litigated or arbitrated.
Common Contract Pitfalls
- Using a template without customization
- Vague scope of work
- No dispute resolution mechanism
- Unenforceable provisions
- Failing to address termination
- Ignoring boilerplate provisions
The Value of Professional Contract Review
The cost of reviewing a contract before signing is trivial compared to the cost of litigating a dispute that a better contract would have prevented. When we review a contract, we look for provisions creating unintended liability, ambiguities, missing protections, and unenforceable provisions.
Frequently Asked Questions
Do we need a lawyer to review every contract? For routine, low-value contracts, self-review may be adequate. For significant financial commitment, intellectual property, or ongoing obligations, professional review is essential.
Can we negotiate the other party's standard contract? Yes. "Standard" contracts are starting points, not take-it-or-leave-it documents.
What if the other party won't agree to our changes? We help you identify which provisions are essential and which are desirable but not critical.
Protect Your Business Relationships
The business law attorneys at Poulson Law can draft and review contracts that serve your business. Contact us at 607-547-1195.
