Estate and Business Planning Legal Blog

Saturday, March 24, 2018

Four Simple Tips on Preparing an Effective Contract


Regardless of the type of business one has, some type of contract is usually required for one's dealings with customers, suppliers, and the like.

First, the exact quantity and quality of goods to be provided must be set forth clearly, along with the price. The quantity and price are essential terms which must be stated so as to avoid ambiguity and thus avoid disputes and possible litigation.  With a service contract, the services to be provided should be itemized so that it is clear what it is expected.  Of course, the payment for these services must also be set forth, along with details as to when the services are to be provided.  

The obligations of each party must also be laid out clearly. For example, when payment should be made is a necessity for an effective contract, and providing for penalties in the form of interest is a good way to motivate people to pay promptly.  When goods are expected to be delivered is also important to mention. With a service contract, what is expected, in terms of hours, exclusivity, and the like should be specified.

A method of resolving disputes should be dictated by the contract.  For example, if payment is significantly late, then the provider of goods or services should be able to suspend the delivery of goods or provision of services without being culpable. Certainly, arbitration is one method of dispute resolution, although allowing the non-breaching party to institute legal action in the courts can serve to discourage the breaching party from refusing cooperation.

What state law governs the contract is an essential term which must be included.  If the person drafting the contract is a New York person or entity, it would behoove them to have New York law govern.  Moreover, the contract should state the other party consents to the jurisdiction of the courts in the State of New York, thus avoiding the New York person or entity being forced to commence litigation in another state.

While some business owners prefer to prepare their contracts on their own, it would be wise to have those contracts reviewed by an experienced attorney so that they are enforceable and accomplish the goals of the business owner.

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