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How to draft a contract to help minimize disputes

It is never fun dealing with contract disputes, though sometimes they may need to be addressed. Planning and thoughtfulness during the contract negotiation, drafting and formation process can help prevent problems and contract disputes from occurring down the road for many small businesses. A problematic contract can cause significant disruption and costs for a business so it is helpful to not only know how to respond to contract disputes but also to know how to properly execute a contract as well. Some tips for contract formation and avoiding contract disputes can be useful.

Trust is an important part of a business relationship but it is also important to have a contract that is best for the business and protects the interests of the business. Contract problems can be largely preventable. First, it is important to be specific about performance of the contract such as when the work that is the subject of the contract will be performed. When a specific time for performance is stated in a contract, it may allow a party to be discharged from a contract if the provision is not adhered to. In general, it is always best to be a specific as possible, rather than vague, concerning details in a contract.

On that note, it is important to establish the quality level that is expected for any work performed under the contract and ensure both parties understand the quality that is expected under the contract. The contract should also specify the party that determines if the quality level requirement has been met under the contract.

Lastly, it can be helpful to provide a provision in the contract for early termination of the contract. There are sometimes good reasons to end a contractual relationship and it is not always necessary, or fun, to wait for a breach of contract situation to end a contract. Usually an early termination provision will provide for some exchange of money at a percentage rate that represents the amount of money that would have been made over time or amount of profit that would have been made if the contract had not been terminated.

Contractual relationships help guide and protect parties who may be enthusiastic about working together but also want to avoid headache and potential costs down the road. With the right help, a properly drafted contract can be clear and also provide for resolution of any problems that may arise.

Source: HG.org, "A Few Simple Tips for Avoiding Contract Disputes," Accessed June 19, 2016

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