Business Contracts: Purposes and Pitfalls
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New entrepreneurs have a lot to learn in a very short period. Exiting the world of promises and handshake deals and entering the more strict environment of clients and contracts can be overwhelming at first, but understanding what goes into these documents and how they benefit the parties involved will clarify how business contracts can work for you.
Business contracts are agreements between two parties in a professional setting, usually describing a service being rendered and the price being paid for it. Documenting your arrangements and ensuring that they are legally binding helps to make sure both parties hold up their end of the bargain. Without putting plans in writing, you're at the mercy of the other party's reliability, as verbal agreements cannot typically be enforced in court.
Contracts usually have sections in them detailing what actions can be taken in the event one party does not fulfil their obligations. For instance, a contractor who misses their promised deadline may have a clause in their standard work agreement giving the client certain compensatory discounts. On the other hand, a client who doesn't pay can often be compelled in a court of law to uphold their part of the arrangement.
Creating and Negotiating Agreements
While preparing your document, do as much research into the other party as you can. Pay special attention to deals they've made in the past, so you can be aware of what they'll likely expect from you and what you can reasonably request of them. A simple Google search into a given client or company can unearth more useful information than you may expect. Red flags such as finding that a contractor's typical prices are well out of your range or that the last few of their clients have yet to receive their services will save you the trouble of learning their deal-breakers at the negotiation table.
When forming and negotiating the contract, keep in mind your agreement should benefit both parties equally. Predatory loopholes and one-sided deals are something you and your attorney should be on the lookout for, but they're tactics you should also avoid using yourself. A client is less likely to do repeat business with you if they feel you've exploited them.
Maintaining and Modifying Contracts
When it's time to finally form your document, make sure the presentation is as professional as you can manage. An eye-catching logo on all of your contracts, documents, and invoices will promote brand recognition among your clients while giving your company a sense of legitimacy. A graphic designer can create the perfect logo for a price, but online tools are widely available for you to make your own from a variety of templates.
There are also tools available online for the creation and distribution of contracts. These programs allow you to make alterations to agreements so long as both parties agree to them, store your documents online for security and easy access, and distribute them to all affected parties. Keeping your paperwork up to date and organized will guarantee it will be easily accessible if any of your arrangements need to be enforced.
First-time business owners face a steep learning curve, and contracts bring with them a host of complications and regulations. Research the specifics of your region and situation, and don't be afraid to contact professional help if necessary.
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