The Importance of Business Contracts and How To Create Them
As a new business owner, it’s crucial that you understand business contracts, as they’ll be necessary for you to operate at a high level and protect yourself legally. Though contracts should be reviewed by legal experts, the ability to create them yourself will empower you significantly as a business owner. It’s also beneficial to understand the negotiation process, so you can reach favorable arrangements more effectively.
Why You Need a Contract
The primary reason that you need a contract when doing business is that contracts protect the parties involved in agreements by providing evidence of said agreements. Basically, a contract holds everyone accountable. Without a contract, you risk being hurt in legal outcomes, even if you were in the right.
What Your Contract Needs To Include
A basic contract should explain the obligations agreed to by each party, and prescribe consequences for breaking said terms. Contracts often include agreements about their own dissolution; one party might agree to pay ‘X’ amount if they end the agreement early, for example. You should also include terms that help to settle disagreements because they can help to prevent extensive arbitration, court proceedings, or mediation.
How Negotiations Work
The negotiation stage of contract creation is when you express your interests and collaborate with the other parties to reach terms that best serve those interests. Negotiating is about compromising without giving up what you want the most.
Before negotiating, you should identify your main interests, decide which things you won’t compromise on, predict the interests of the other party and their non-negotiable terms, and imagine potential alternatives should you disagree on certain aspects. To help negotiations go more smoothly:
Know what you’re talking about. Presenting quantifiable research will make your points much stronger and give you credibility during negotiations.
Don’t discuss terms with outside parties. Respect the privacy of everyone involved and ensure no one outside of your lawyer interferes in the negotiations.
Take your time. While a particular contract can be exciting, or even financially crucial for your business, rushing through negotiations is risky and rarely helps the outcome. If you rush through this stage, it’s easy to miss something that can end up costing you money or wasting your time because of technicalities.
Use Tools To Simplify the Creation Process
Typically, contracts are saved in PDF form so they're easy to read on a variety of devices. You can extract PDF pages which enables you to change sections of contracts when you need to amend them or recycle parts of older contracts for use in new ones. You can use slideshow software to present contracts in pieces during negotiation meetings with groups of people.
Contracts Are the Foundation of Business
Contracts enforce agreements and decrease the risks associated with entering them. A good contract should thoroughly explain what each party will receive from the agreement and prescribe what will happen if terms are broken. Be sure to take your time during the negotiation stage and express your needs completely.
Contact your local chamber of commerce to find out how you can join to connect with other business owners in your community.
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