When conducting business, whether as a freelancer or a leader in a startup organization, it is paramount that you protect your venture and yourself. Using an enforceable contract ensures the business is protected. There is a notion among many beginners and a few experienced business owners that a written agreement is equal to the anticipation of trouble. Contrary to the thoughts, a contract serves to protect the interests of all the involved parties. Better yet, a written agreement ensures that there is a good working relationship between all the institutions and partners or customers involved.
So how does a contract increase the chance of success and protect the interests of the involved parties?
Contracts Establish Trust between the Parties Involved
Establishing trust in any business transaction or relationship allows the business to thrive as the customers feel confident enough with the products and can freely conduct business with the said institution or person. An excellently drafted contract provides confidence by establishing the expectations of each party. In matters where money is involved, which is almost always the case, contracts help remove uncertainty while making transactions. Eventually, both parties can engage in developing their plans.
Improve Efficiency by Outlining Obligations and Remedies
Uncertainty caused by the lack of clear guidelines results in time wastage, lagging around, and eventually loss of money. A contract addresses such issues by clearly outlining obligations each party should meet. As such, upon signing, those involved can dive into their respective commitments immediately. On the other hand, the contract stipulates the remedies in the event of contract breach.
Contracts Spell Out the Procedure to Follow in Settling Disputes
Once in a while, there may rise disagreements between business partners. The disputes require settling if the business partnership is to move on. The contract provides avenues where disputes are resolved. Proceeding to court might not always be the solution. There are several other avenues such as through mediation or arbitration. The channel of solving the dispute solely lies with the parties involved.
Contracts Enable Proper Contract Termination Methods
Maintaining a better working relationship between partners is crucial if one is to succeed. Contract termination may come with challenges and taint the relationship. The contract outlines the procedure of contract termination. As such, no one party is caught unawares. Often, a termination clause requires the party terminating the contract to give notice in advance. As such, the affected party can make adjustments in matters of finance and other aspects.
Contracts Define Actions Adopted if Unforeseen Situations Arise
Often, contracts include a clause called “force majeure” that sets out parties’ obligations in the occurrence of situations such as natural disasters. As such, failing to meet the responsibilities do not attract penalties or regarded as a breach of contract.
It is evident enough that contracts come to smoothen business transaction, build trust, and improve efficiency; all aspects of the business that spur growth and contribute to success. However, while drafting a contract, it’s essential to hire the services of an experienced attorney to help in its generation. Any further transaction should, therefore, be protected by the written agreement.