Business contracts are complex documents. They can go back and forth with many edits, changes, and requests. They can have countless attachments, footnotes, and fine print.
This can make it challenging to identify pitfalls. Thankfully, a few best practices can help. One is to prioritize language simplicity without jeopardizing the importance of contract details.
Scope of Work and Deliverables
Contract review can be time-consuming, requiring specialized skills and an understanding of the commercial goals and risks. It’s critical to focus on key terms and save resources negotiating unnecessary clauses that may not be enforceable or protect the company’s interests.
Scope of work (SOW) and a statement of work are project management tools used to document the specific tasks to be completed by an outside vendor or agency. The scope of work details the project objectives, requirements, and goals, while the statement of work provides a detailed outline.
Both documents may include a list of deliverables. It is essential to specify what is required to ensure a project meets its goals and stays on budget. Also, it’s important to clarify where and when the work will be done — whether remotely or on-site. Specifying these details can prevent confusion and miscommunication about deadlines.
Representations and Warranties
Business contracts protect legal rights and reduce risks in a variety of situations. Because oral agreements are only sometimes enforceable, businesses must have written contracts. Getting contracts in writing also reduces potential disputes over interpretation or incomplete documentation.
A vital element of a contract is representations and warranties (R&W). These provisions specify the parties’ obligations and duties, such as the scope of work, delivery dates, payment terms, confidentiality, intellectual property protections, indemnification, and termination procedures.
A contract attorney from Linden Law Partners can help businesses craft R&Ws to reflect the specific transaction, avoid potential pitfalls, and minimize legal risk. However, non-lawyers must have a firm grasp of the key commercial terms and provisions of contracts. This enables them to efficiently review and approve agreements without relying on lawyers for every transaction. This approach also helps teams be consistent and keep track of their positions on contracts. It also saves time by reducing the need to search for the proper clauses manually.
Intellectual Property Rights
Navigating business contracts requires understanding why a particular clause exists, seeking and understanding legal advice when necessary, and thorough documentation of changes. Clear language reduces confusion and ambiguity, fair negotiations ensure both parties walk away satisfied, awareness of contract deadlines keeps everything running smoothly, and performance monitoring helps keep everyone accountable.
It’s also vital that contracts be written using correct legal names and that any documents referenced are attached and available for review. This might seem small, but it can cause big problems.
Negotiating a contract is not a competition or power struggle but a collaborative effort toward mutual benefit. Taking reasonable positions on contract terms will close deals more quickly, reduce the risk of losing future opportunities and help foster long-term relationships that benefit both parties. This will help avoid expensive, avoidable disputes in the future.
Dispute Resolution
Dispute resolution is a crucial component of any contract. It’s essential to set forth how disputes will be resolved, such as through mediation, arbitration, or civil litigation. It’s also important to include provisions that allow for contract termination, including the procedures and conditions for terminating.
Another essential part of dispute resolution is clearly defining each party’s consideration for the other in exchange for their promise to perform their services or deliver goods. This includes any payment obligations or terms, such as whether they are due immediately or at the end of the contract term.
Although oral contracts are legally enforceable in some circumstances, written contracts reduce the risks of legal disputes. They can prove a business agreement should a legal issue arise. In addition, a legal professional can help review and draft clear and concise contracts to prevent misinterpretation or confusion.
