Fiona Kingscott, contracts expert and solicitor at Lincoln Langleys Solicitors, explains how a good contract can help safeguard your business.
Most businesses will have contracts in place with suppliers, customers and employees. But often they can be improved. Ambiguous language, or failure to precisely set out the obligations of each party, can lead to operational disruption, disputes and even court action, at huge cost to your business.
As tempting as it is to download a standard contract online, it may not cover your specific business needs. A legal expert will be able to guide you through the process, but below are five points to consider.
Simplicity is key
While long-winded contracts are common in places like the US, there is a lot to be said for simplicity. By using simple, clear and jargon-free language, both parties can understand the contract, which helps them adhere to their obligations. Contracts will naturally include some complex legal language, but wherever possible they should be in plain English.
Ambiguous wording can give a disgruntled supplier a reason to take you to court, if they have a grievance. They will argue a clause means something you may never have intended it to mean. Courts look carefully at the facts of the case, but ultimately they are obliged to read a clause according to its natural meaning, and may rule that a clause means something you never intended it to mean. So always make sure your clauses are clear and precise.
Watch grammar and punctuation
Well written contracts, with correct spellings, grammar and punctuation, ensure your contracts look professional, but attention to detail can also help you avoid ambiguities. Just one misplaced comma could alter the meaning of a sentence and leave your business open to legal action.
Ask the experts
You may have had a contract written up by a solicitor years ago, but how do you know whether it meets your current requirements? Or perhaps you downloaded an online template that only covers the basics. The truth is a bad contract can be worse than no contract at all, since the other party could exploit any loopholes. This is why it always makes sense to draw up any business contracts with a commercial solicitor, and regularly review them so they account for any changes in the law.
A legal expert can advise on matters such as limitation of liability clauses, which specify what your firm will cover in the event of it being in breach of contract. The danger is that you exclude too much and the clause becomes unenforceable.
Know what good looks like
Last, but not least, take the time to think about whether the contract is easily understood by anyone, not just someone with legal knowledge. Background clauses (or recital clauses) provide key information, such as the purpose of the contract. Always strive for clarity over creativity, and make sure it is structured in a logical way, with each sentence conveying a single point. Contracts provide businesses with the reassurance that they can carry on developing client relationships and growing their brand, whilst being legally protected.
Langleys Solicitors has offices in Lincoln and York.