Strong, effective contracts form the foundation of any successful business enterprise. From employee handbooks to vendor contracts, a business owner must pay careful attention to numerous factors to protect the organization and encourage beneficial relationships. Unfortunately, it is not uncommon for a company to draft a contract with built-in errors.
For many businesses, the vendor relationship is a key factor in their day-to-day activities. As such, business owners must take care in drafting vendor contracts. While every business scenario is unique, there are numerous common mistakes an organization can make, including:
- Using vague terms: A vendor contract must use clear, concise language. Too often, a business owner will rely on vague or undefined terms in an effort to slant the contract too far in their own favor. Unfortunately, this can work against the organization if a breach becomes reality. The vendor could argue they were unsure of the actual terms or unclear about certain terms due to the vague language.
- Using industry jargon: Too often, business professionals think and speak using industry jargon and acronyms. When this form of verbal shorthand somehow makes its way into a vendor contract, it can create confusion and ambiguity. For example, the vendor can claim they did not understand various aspects of the contract or thought the acronym meant something different than intended. Whatever the case, a confusing contract is likely not enforceable.
- Overlooking penalties for breach of contract: While it might be an uncomfortable discussion between long-standing business partners, the organization must include language that stipulates various restrictions and the consequences for breaking the terms of the agreement.
With a sound, enforceable contract, the business owner can rest easy. Not only is the contract effective at promoting the company’s goals and needs, but if the vendor breaks the terms of the agreement, they can suffer strict penalties. If the contract is poorly written, however, the business owner could lose legal arguments regarding liability and accountability.