I am sure most people are not jumping with excitement at the thought of writing contracts for their business. The truth is that contracts are a must in any business, including small businesses.
Here are 5 Common Mistakes Small Business Make and How You Can Avoid Them:
1. Not Having a Contract
The number one mistake is not having a written contract at all. At the very least contracts outline expectations to avoid misunderstandings. People often say things and then don’t remember exactly what was said later. Contracts minimize your risk as a business. How much did you say you were charging? What exactly was included in your package? A contract serves to protect both parties involved.
2. Using a Contract You Don’t Understand
Many people are tempted to use quick fill in the blank forms generated online or someone else’s contract they supplemented their own information in. While our expertise may not be in legal contracts we need to be aware that contracts impose legal obligations. These apply not only to you and your business, but may create situations where you may get caught off guard. This is not a key strategy for success in your business.
You should be very clear on all aspects of any contract you agree to. If there are any questions you may have don’t hesitate to ask a professional. You should have basic understanding of general, local, and industry related laws. Contract like a boss, because Hey You’re the BOSS!
3. Incorrectly Identifying the Parties in the Contract
Opps. A common mistake is to use the name of a person rather than their business name when entering into a contract. If you have an LLC your contract should state the name of your business not your personal name on your contract. If you sign a contract in your individual capacity, rather than as the authorized representative of the entity, you are personally liable under the contract.
4. Not Anticipating What Happens After the Contract Ends
Sometimes relationships do not end in the way you thought they would. Maybe your client was a nightmare or they were unhappy with your product or services. What happens in these situations? What happens if you were unable to perform your end of the contract? Your contract needs to define what will happen in these situations. Does the contract require written request to terminate the contract? Will refunds be given in any situation?
5.Not Clearly Defining Terms or Including Ambiguous Language
After terms are defined they should be consistently used throughout the rest of the contract. If there are internal conflicts between terms there will be confusion and could affect interpretation of the contract. You do not want ambiguous language that offers interpretation in your contract. Things should be stated simply and clearly.
Did you find that you may have made some of these common mistakes? Take action now. If you do not have a contract for your business get one. If you do have contracts make sure you read through them to ensure you know the in’s and out’s of what they really say. Do your contracts reflect your brand, your business and your current policies? Check out our ecourse on contracts for a step by step guide to contracts for your small business.
This information is for educational and informational purposes only; it is not intended as and does not constitute legal advice and does not create an attorney-client relationship between you and the author. You should not act, or refrain from acting, on the basis of information provided here without first consulting legal counsel in your jurisdiction.
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