Many business analysts would say that risk is what generates profit. Finding untapped market niches and offering goods or products that others have not involves a degree of risk but can also lead to substantial rewards. No one can run a successful business enterprise without accepting some degree of risk.
However, most entrepreneurs and executives would like to diminish the level of risk involved in routine company operations. Contracts play an important role in minimizing organizational risks. The three contractual inclusions below can help executives and business owners in California limit how much risk they’ll assume when conducting business.
Non-disclosure agreements
California law heavily limits the use of restrictive covenants, particularly in employment contracts. Businesses often cannot enforce non-compete agreements or non-solicitation agreements against former employees. Thankfully, enforcing a non-disclosure agreement is still possible in many scenarios. Companies seeking to protect trade secrets can include clauses in contracts with workers, vendors and service providers to minimize the chance of the other party disclosing information to the public that would harm the business in the future.
Penalties and fees for infractions
A business taking legal action to enforce a contract can often request damages from the courts. Securing a judgment for damages can be difficult and will require financial proof. The company will only be able to recover exactly what it lost in most cases. Including specific financial penalties and fees in a contract can deter contractual infractions. Those inclusions can also make it easier for the business to seek more in compensation from the other party if they do not fulfill their contractual obligations.
Pre-litigation dispute requirements
The need to take a contract and dispute to court could be very expensive. It can also cause damage to a company’s reputation with future clients, other suppliers or prospective employees. Including a clause to keep disputes out of court can help businesses settle disagreements with less expense or risk to their reputation with the community.
Those who negotiate contracts with the right terms included will often have an easier time resolving conflict and safeguarding their company’s bottom line. Seeking legal guidance proactively, therefore, is generally wise in this regard.
