Key Tips on What to Consider When Drawing up a Legal Business Contract - Insane Visions

Key Tips on What to Consider When Drawing up a Legal Business Contract

After months of thinking about it, you finally come up with a decision – you’re going to start your own business! You think that doing this will enable you to spend more time with your family while earning money at your own pace. The business is finally coming together as you now have supplies, your own little store, and you’ve hired a few people to help you.

While doing all of this is good for your business, have you ever considered drawing up a legal business contract before your business starts operating? Or better yet, do you actually know how important a legal business contract is to your business? Let this article give you answers to those questions.

First, What Is a Legal Business Contract?

Regardless of what industry your business is in, a legal business contract can make or break how well your business does in the future. Simply defined, a business contract is a legal agreement between your business and another party, which could be an employee, shareholder or another business.

A business contract is important and can be used in situations wherein services are rendered for a fee, or specific duties and responsibilities are required to be performed. The business contract acts as a manual to two (or more) parties to determine what to do and what not do during the period of the agreement.

What Should You Consider When Drawing Up a Legal Business Contract?

Drawing up a legal business contract isn’t as simple as you think. It’s not just about what you want from a certain party, but how you’re able to say it. The business contract should benefit all of the parties involved.

To give you an idea of what should you consider when you’re drawing up a legal business contract, here are some key tips to read before you start:

1) Keep it simple: Contrary to what other people think, you don’t need a contract that’s full of “heretofores” to make it effective. In business contracts, what’s important is how you’re able to express your intention without using too many flowery words.

  • Don’t use terms you don’t understand just to make your contract sound credible or important. Your business contracts are used to make agreements so make sure that the words you use are simple enough for the other party to understand.
  • Try to make the contract brief, using short sentences and simple, numbered paragraph headings that can easily alert readers what’s inside the paragraph.
  • Keep in mind that you shouldn’t leave any details out. If there are terms that should be explained in the contract, go ahead and do it. This will avoid confusion from the other party.
  • Make sure you understand what is written in your contract so when the other party asks you about details, you can answer right away.

2) Deal with the right person: Imagine this: you are talking to a junior staff member of a company for hours, and at the end of the discussion, you’re not able to secure a deal, since he still has to ask his senior about closing a decision with you. Being involved in a situation like that is not only stressful, but a complete waste of resources. The spent time could have been used for other things that benefit your business.

  • Avoid being in that kind of situation by asking who should you talk to if you want to close a deal. Don’t assume that just because a certain person entertains you during your visit, he has the right to make decisions on behalf of the company.
  • If you’re not sure who is “the boss” of the company, take the time to ask around. In a smaller business, one of the owners can have the authority to make transactions with you while in bigger organizations, it can be a chief operating officer or chief executive officer.

3) Identify each party correctly: This is probably one of the most critical factors in drawing up a business contract that most entrepreneurs forget… don’t be one of them.

  • The contract should include the correct legal names of the parties involved in the agreement. You might think that using a generic name in a contract can save you time and money, but in the long run, this can actually put your business in danger.
  • Putting the correct names in the contract will allow both parties to identify who is responsible for what, and who has legal rights in case things go wrong in the future.
  • For instance, if the business you’re trying to make a deal with is an LCC or corporation, identify it by its correct legal name in the contract by including the LCC or Inc. suffix, and not the name of the people who are signing the contract.

4) Remember a confidentiality clause: When your business makes an agreement with another party, chances are the latter will have access to all of your business’ important files. The other party will be privy to all of your business information so they can perform their duties and responsibilities in your business.

  • Your business contract should always contain a confidentiality agreement clause. This will be your guarantee that whatever the other party learns from your business will only be used to fulfill what is expected of them, and nothing else. The other party is not allowed to share any information with those who are not included in the contract agreement.
  • If the other party doesn’t follow what is stipulated in the confidentiality agreement, you have the option to sue them and file a lawsuit.

Key Takeaway Points

A business contract should be at the top of your list when you’re about to start a business. Although this is a mere “document,” it can become a reason for your business’ success or failure over time. And while drawing up a business contract can be difficult, it can be done. You just have to be aware of the things presented in this article. Then you can create a contract that will not benefit your business long-term but will also ensure protect your employees from employment discrimination!

If you have legal concerns especially on issues involving workplace employment discrimination, then click here to learn more information.


Anne McGee

Anne McGee has over 20 years of experience writing about law subjects where she hopes her knowledge can help the common reader understand law topics that may be of relevance to their daily lives. If she’s not reading a good book, then chances are Anne is jogging during her free time.

Beatrice Santos

Beatrice Santos

Beatrice Santos is taking up units in business law and currently affiliated as an intern in a local law firm. She is passionate in helping those who have any queries regarding business laws and how these may affect their respective businesses.
Beatrice Santos