Whether it is between individuals, businesses, or other entities, a contract requires careful forethought if problematic issues are to be avoided. In this article, an experienced Louisville contract lawyer offers advice on how to prevent some of the problems most frequently seen.
Planning Is Key
Contractual agreements between individuals who are planning to work together in a new business often come as an afterthought. In the excitement of getting the enterprise up and running and beginning to produce their goods or provide their services, the legalities can easily be pushed to the background. After all, the individuals involved have every expectation of engaging in a profitable business together, and have agreed to the basics of what they want to do and how they want to do it. The thought of putting it all down on paper in detail seems almost insulting, implying a lack of trust that each party will be as good as his or her word. Unfortunately, the days when an agreement could be sealed by a handshake and a gentleman’s word of honor have long since passed. The “gentleman’s agreement” does still exist, and in certain circumstances may even be appropriate. In today’s world, however, given the plethora of unforeseen circumstances that can interfere with the successful running of a business, a written contract is essential for the sake of all concerned.
Why Things Go Wrong
Disputes occur when contracts are not written in a way that everyone’s expectations and obligations are clearly spelled out, and there is room for confusion or interpretation. If the language lacks specificity or details are omitted, problems can arise. Some of the most frequently seen are:
1. No Timeframe Established
Under the terms of a contract, there must be a specific space of time during which the designated tasks are to be performed. Delays in meeting deadlines for work completion or delivery of materials can run into weeks or months, and if there is ambiguity in the contract concerning when the materials are to be received or the work is to be done, there may be little recourse for the party most adversely affected. Such approximations as “shortly,” “in a few weeks,” or the like should be avoided, as they are open to interpretation. If the contract fixes a deadline at a specified number of days, weeks or months with exact calendar dates given, the party under obligation is clearly responsible for fulfilling his or her part. The contract can be considered in breach if the deadlines are not met or the work is not done in a timely manner. This also places the responsibility on the obligated party to notify the others if there is some impediment, so that alternative arrangements can be made and unpleasantness avoided.
2. Quality Required Is Left Unspecified
Exact specifications for the product or services that are to be manufactured or built are extremely important. “Good enough” may do in some instances, but there are circumstances under which precise tolerances in machinery, vehicles, or other products must be in place, and these should be clearly spelled out. An automobile engine that is intact but unreliable because the build quality is sloppy can cost enormous sums of money in lawsuits at best, and lives at worst. Perhaps the engine, when it was built, was the best the company could produce, and the quality has improved in subsequent years. Still, if you are purchasing those engines for your next model of automobile, you want the build quality to be up to the strictest standards before you put them in your cars and sell them to the public. The precise specifications and tolerances that you consider acceptable must be set out clearly in the terms of the contract, so that no doubt or confusion can arise.
3. No Escape Clause
It is always advisable to include in the terms of a contract, a clause that allows each party to be released. This can allow for changes in technology that render a particular type of work obsolete, or for circumstances encountered by one or the other of the parties that make it impossible or profoundly difficult for them to continue with the project. It may also allow for one party to retire or leave the business for some other reason without hard feelings or a contract breach and subsequent litigation. Again, the terms under which either party may leave or terminate the contract early should be precise and unambiguous.
Think It Through
By carefully thinking through some of the issues that can arise, new business owners can save themselves time, money, and hard feelings if they provide for these in a well-written, detailed contract. An experienced Louisville contract lawyer who has seen many contract disputes and is very familiar with why these things occur, can provide valuable assistance in the development of a thoughtful, comprehensive contract that is specific to the needs of your business.
Call Your Louisville Business Dispute Lawyer Today
If you need assistance in developing a contract, or if you are involved in a contract under dispute, contact the Patricia A. Abell Law Office, your Louisville business dispute lawyer by calling 502.561.3455 today.