Seven Red Flags to Watch Out for When Drafting and Negotiating Contracts

 Posted on August 23,2022 in Business Law

Businesses will create contracts in a number of different situations, and it is important to make sure the terms of these agreements will provide them with the protection they need. Addressing potential issues when initially drafting a contract or negotiating terms with the other party can save a great deal of difficulty in the long run. With the help of a business law attorney, a company can ensure that it will be able to identify and resolve any concerns while avoiding problems that could lead to financial losses in the future. Some issues to watch out for during the contract drafting and negotiation process include:

1. Ownership of work performed - Contracts should specify who owns the work product created pursuant to the agreement. If this is not addressed, the company that paid for work may find that it does not have the rights to use or sell the work performed, or a person who performed work may lose the ability to claim ownership of what they created.

2. Terms of payment - The contract should address when and how payments will be made. This can include specifying the amount of each payment, the date when payments are due, and what type of payment will be used. In many cases, a contract will state that a down payment will be made at the outset of the project, and regular payments may be made while work is being performed.

3. Indemnity and liability - Companies should consider what types of damages they may be liable for and include language limiting their liability in the contract. Liability and indemnification clauses can protect a company from being held liable for damages caused by the other party to the contract, and these clauses may also specify who is responsible for paying certain types of damages.

4. Non-compete agreements - These clauses provide a company with protection by ensuring that an employee or vendor cannot work with a competitor or use inside information to gain an unfair advantage in the marketplace. To ensure that non-compete clauses are enforceable, they must be necessary to protect legitimate business interests, and they must be limited in their geographical and time-based restrictions.

5. Renewal - In some cases, contracts may include clauses that allow for the agreement to be automatically renewed, and these clauses should be carefully reviewed to ensure that they are fair and reasonable. Purchase or vendor contracts that renew automatically may lead to unexpected losses or other complications in the future.

6. Termination - Both parties to a contract should have the right to terminate the agreement under certain circumstances, and these termination clauses should be clearly spelled out in the contract.

7. Penalties for contract violations - A contract may address what will happen if one party breaches the agreement, including specifying what remedies are available to the non-breaching party.

Contact Our Broward County Contract Drafting and Review Lawyer

When drafting and negotiating contracts, companies should watch out for these potential problems and address them accordingly. With the help of a skilled business law attorney, businesses can ensure that their contracts will protect their interests. To learn how The Elliot Legal Group, P.A. can assist with issues related to contractual agreements, contact our Plantation business contracts attorney at 754-332-2101 and schedule a consultation today.

Source:

https://smallbiztrends.com/2017/02/important-contract-terms.html