Do you want to maintain good relations with customers, suppliers, and other business partners? If yes, then use contracts as these strengthen the relationship with your business partners and help to prevent disputes.
The biggest mistake you can make is signing a standard contract without thinking about its content. A well-considered and well-formulated contract, on the other hand, strengthens the business relationship, which you can orientate yourself at any time. In addition, it takes into account the peculiarities of the respective relationship between your company and your partners.
Which is it wrong with many contracts?
A contract is brought out when something “goes wrong” in the business relationship. However, this is usually the moment when the parties realize that certain details are not regulated in the contract.
The lack of these details makes everything uncertain. People see, hear, and understand things differently; everyone has different ideas about certain terms and expressions. In my experience, more than two-thirds of the contracts concluded to have "incomplete" regulations.
Such a poorly designed contract then leads to discussions and ultimately to arguments over what has been agreed.
Tips to make contracts better
There are a number of points that, if observed, will immediately make a contract better. Below are tips that you should keep in mind to make contracts better:
1. The contracting parties: Who is managing a contract? Make sure that the data of the participants is correct and check this data in the commercial register. Also, make sure that the company you do business with is legally represented.
2. Be specific: Clearly state what you mean in the contract. Nothing is as dangerous as formulating agreements with general words and terms that can be interpreted in different ways. Include a list of definitions in the contract if there is uncertainty about the interpretation of certain terms.
3. Declare the applicable terms and conditions: General terms and conditions only apply if their application has actually been agreed between the parties. So, clearly mention in the contract your general terms and conditions. Otherwise, you cannot rely on your terms and conditions in the event of a dispute. Also, make sure that they are handed over on time.
4. Consider subsequent changes in circumstances: Circumstances that are important to the parties to a contract can change. This can be external circumstances or new knowledge that is important for the parties. Sometimes there is a need for changes during contract execution. And sometimes certain aspects are simply not considered by the parties and only noticed at a later time.
Contracts must take this into account, be it through clauses to change regulations or, if nothing else is possible, through the possibility of early termination on the part of one or all parties.
5. Consider ways of canceling the contract: Sometimes it is necessary to withdraw from a contract. At that time, everyone should be aware of the possibilities. In any case, it is important that the relevant deadlines and the consequences of waiting for the regulated deadlines are clear to the parties. In addition, you should consider in advance the consequences of loosening, for example, if a party has already performed.
6. Regulate costs: It is important for each contract partner to ask what costs they have to bear with regard to the contract. You should think about the costs of forming a contract and its review and modifications by hiring a lawyer.
However, costs for third parties such as a notary or a government register must also be taken into account, especially if there is a foreign link and the cost structures differ from those in Germany.
After all, the costs for monitoring the execution of the contract should not be neglected.
7. Prepare an event for the dispute: There are three things you should be aware of when preparing for a dispute: where a dispute is settled, an ordinary court or arbitration tribunal is referred (or mediation is used), and which law applies to the contract.
The latter is particularly important if the parties come from different countries or if the starting points for the provision of the service are in different countries.
Finally, in the case of bilingual contracts, you should also remember to clarify which language version has priority.
8. Formulate completely: Too often a contract is incomplete and important things are forgotten. Not only describe the service to be performed, but also think about things that can go wrong and how you can resolve disputes.
9. Signing the contract: Most contracts are already valid if there is an oral agreement. The problem, however, is that verbal agreements cannot be proven. Therefore, make sure that your agreements are recorded in writing and confirmed with a signature. If a contract consists of several pages, have the parties’ signatures on each page.
10. What happens if someone does not keep the agreements? The aim of a contract is that the parties determine the agreements made between them and then adhere to them. But what happens if the contract partner does not adhere to the agreements? Then, you can claim damages under the law. Also, you can include a contractual penalty clause in the contract.
Conclusion
Drafting contracts is an art. Do you need help with contract drafting services? We can help you with employment contracts, rental contracts, and takeover agreements or in the formulation of general terms and conditions. We have skilled & experienced personnel that can handle tasks like contract drafting and contract review for your law firm. Contact us to learn more about the entire range of our LPO services; call us at +1 646-688-2821, or send an email at info@cogneesol.com.
Also Read: The Combination of AI & Human Expertise Improves Contract Review
Also Read: The Combination of AI & Human Expertise Improves Contract Review
