Every day thousands of Florida small business owners enter into contracts. These essential agreements can be used to establish everything from where an entity will lease space to how they will serve their clientele. Although these important documents have legal implications, many of those signing them aren’t attorneys. In many cases, these parties will enter into agreements without fully understanding their meaning and requirements. This practice can create real problems for small business owners and their operations. The good news is that by knowing the steps to avoid, you can help protect your interests. Here are 10 common business contract mistakes.
Not Entering into a Valid Contract
Business contracts can be the foundation of a growing enterprise. However, these complex and important documents will not be effective unless they are properly formed. Generally, to create a valid contract, you need 1) an offer, 2) acceptance, and 3) consideration. If one of these elements is missing, you may not have a valid contract.
Making a Verbal, Rather Than a Written Contract
Depending on the type of agreement, Florida contracts may be written or unwritten. However, by law, some contracts must be in writing to be enforceable. For example, if your contract involves real estate or the sale of goods valued at over $500, Florida law requires that there be a written agreement for the contract to be enforceable. Additionally, just because an agreement can be verbal doesn’t mean it should be. It’s usually far better to have a written rather than a verbal contract when conducting business.
Signing Without Understanding
Contract language is often confusingly worded and in small print, and it’s understandable why someone might forgo reading this type of document. However, when you sign a business-related document without understanding it, you could be agreeing to unfavorable and unfair terms. Therefore, it’s well worth your time to consult with an experienced small business lawyer when devising, reviewing, and entering into a legally binding agreement.
Omitting Key Terms
Although it may seem that an agreement would not require very many terms, some provisions are necessary. A poorly drafted business contract can have devastating consequences for your small business. Therefore, it’s crucial that you take the time to work with an experienced legal professional to ensure that you don’t omit key terms and protective language.
Not Being Clear
It’s essential to use unambiguous language in your business contracts. Otherwise, you may later learn that you and the other party had different ideas about an essential contract term. In that circumstance, you may quickly find yourself in a dispute or litigation over this type of issue. Making sure you are clear and understood is vital. Your small business attorney can help you develop well-defined language for your contracts.
Forgetting to Protect Yourself
An important part of contract formation involves including provisions to protect yourself from liability. This often involves crafting specific language and including indemnification clauses. If you develop and enter into a contract without the advice of business counsel, you run the risk of inadvertently forgetting to protect yourself. Not having the right protective terms in your agreement can leave you and your business vulnerable.
Not Considering the Long-Term
Having a well-constructed document that anticipates your short and long-term goals is essential in business. You want your agreement to serve your business needs now and in the future. For instance, if you are operating a seasonal business, you wouldn’t want to be bound by a vendor contract that involves receiving inventory and supplies all year. Likewise, you will want reliable and unchanging terms if you expect to have a long-term operation. Therefore, making sure your contract covers your long as well as short-term goals is crucial.
Omitting Breach Terms
The majority of small business lawsuits involve breach of contract disputes. You and the other party can avoid this type of conflict by defining what constitutes a breach within your agreement. In addition, breach terms can help both sides understand what is expected throughout the life of the contract and how to avoid disagreements.
Not Thinking About Dispute Resolution
Today, many contracts include dispute resolution paragraphs. You should be considering how you want to resolve potential conflicts with the other party. For instance, you may want to include a mediation provision or an arbitration clause. There are positives and negatives to including these and other dispute resolution provisions. Therefore, you should consult with an experienced small business attorney before adding these requirements to your Florida contract.
Forgetting Liquidated Damages
Liquidated damages clauses are included in business contracts as a protective measure. Should a party fail to uphold their end of the agreement, the clause will state what they have to pay the other party. You may or may not want a liquidated damages clause depending on your position. It would be prudent to discuss the inclusion of a liquidated damages clause with your business attorney.
The best way to avoid these and other contract mistakes is by having your agreement drafted and reviewed by an experienced business attorney. Your business lawyer can help you create an enforceable document that protects your business and interests.
Contact an Experienced Florida Business Attorney
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with commercial leasing, business, and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.