7 Items That Should Be Included in Every Contract or Letter of Agreement

Whether you are creating a written contract or letter of agreement to formalize a business deal, there are certain items that must be included in order to minimize risk in case of litigation as well as clarify the terms of the business relationship. This includes:

  1. Official Names of the Parties – Be sure to sign with the name of the company, not the name of the person acting as one of the parties to a contract. In some cases, the agreement may require both if one of the parties is acting as a guarantor to backstop a deal between two companies.
  1. What Each Party Must Do to Perform the Contract – Include the compensation for the services or goods and detail what the other party must do specifically to receive compensation.
  1. Time Limits on Performance – Detail what the party providing goods or services needs to do and what limitations are imposed; some contracts must be performed by a certain date or at certain increments to be consistent with the intent of the parties contracting and some envision performance at some future time. Others may be open-ended; if so, state that specifically.
  1. Time Limits on Payment – The contract should spell out when payments must be made and what consequences ensue if payments are not made on time (late fees, interest, or charging of attorney’s fees, if an attorney is required to get the other party to pay, etc.).
  1. Clear Language That a Contract is in Effect – If a letter or email merely states the nature or terms of an offer or counteroffer without stating that it has been accepted, then it may not be enforceable as a contract.
  1. Explicit Provisions to Support Conflict Resolution — The whole point of a contract is to keep you out of Court and ensure all parties are on the same page. Sometimes, conflict does still happen and when it does you want your contract to provide for the most peaceful and easeful conflict resolution possible.
  1. Jurisdiction Provisions — In the event there is a conflict, where will that conflict be adjudicated or mediated? That needs to be clearly indicated in the contract.

If you’re a small or mid-size business owner, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.  We can help you create a contract for any business relationship you have that will precisely define the relationship between you and your partner, your employees, your contractors, your customers and for your website.  Having contracts in place protects your business from potential costly litigation and will, in fact, deter others from taking advantage of you.