Drafting Airtight Contracts: Proactive Measures to Avoid Breach

Contracts are fundamental to every business relationship. They define each party’s rights, responsibilities, and obligations in a transaction — and help prevent misunderstandings. When contracts are poorly drafted or fail to address all possible issues, breaches may occur that can result in both parties incurring significant costs and consequences. Here are several tips to keep in mind as a business owner when it comes to drafting contracts that will protect your business interests.

1. Include Specific Terms

To avoid any misunderstandings between the parties, it’s crucial to be as specific as possible when drafting contracts. This means that the contract terms should be clear and concise to ensure both sides interpret them in the same way. Ambiguous or vague language is one of the most common reasons breaches of contract arise. A well-drafted contract leaves no room for misinterpretation or confusion about each party’s expectations.

2. Ensure the Identities of the Parties are Clearly Defined

A common pitfall in drafting contracts is the failure to clearly define the parties to the agreement. While it might be obvious that the parties need to be identified in a contract, it’s essential to include any affiliates or subsidiaries as necessary to avoid confusion. Inaccuracies concerning the identity of the parties can cause a contract to be breached and rendered unenforceable.

3. Avoid Using Boilerplate Contracts

If you are a business owner, it’s important to have the guidance of a business law attorney when drafting contracts and entering into contractual arrangements. Contact Litico Law Group to schedule a consultation to learn how we can assist you.

While boilerplate contracts can serve as a template, it’s best to avoid using them for anything other than a guide. Clauses in boilerplate contracts are often too general and produce unwanted results. Every provision in a contract should be tailored to the specific transaction and meet the needs of the parties involved.

4. Ensure the Contract is Conscionable to All Parties

If a contract is too one-sided, it may be rendered unconscionable. When drafting contracts for your business, the terms must not only be fair to your company, but to the other party as well. Courts typically will not enforce a contract that is deemed unconscionable and this can be asserted as a defense in the event the agreement is breached.

5. Address Any Potential Issues That Could Arise

A good contract should anticipate and address any potential issues that could arise and outline the measures that should be taken to mitigate them. Provisions should be included regarding dispute resolution methods, termination of the agreement, and remedies for any breaches of contract that may occur.

6. Consider Changes That Could Occur During the Term of the Contract

If the terms of the contract will be carried out over an extended period of time, it’s critical to consider any contingencies that could arise during that period. By including provisions concerning any uncertainties, modifications, or amendments, you can ensure the agreement will be adaptable in the event circumstances change and mitigate risk.

7. Ensure the Contract is Legally Compliant

One of the most important — and overlooked — aspects of drafting contracts in business is ensuring they are legally compliant. Creating a contract that violates a federal, state, or local law can result in liability issues or in the agreement being invalidated as unenforceable. It’s also vital to ensure the contract is compliant with public policy, privacy laws, consumer protection laws, industry-specific standards, and various other regulations. In addition, if the parties are domiciled in more than one state, the contract should specify which jurisdiction’s laws apply.

8. Specify the Payment Terms Agreed Upon By the Parties

Issues with payment terms is a common dispute that arises in connection with contracts. When drafting contracts, include detailed payment information, including the amount that is owed, the schedule for the payments, and the agreed-upon methods of payment. You should also include any penalties or late fees charged for payments that are not made on time.

9. Seek Experienced Legal Counsel to Advise You

The best way to safeguard your business interests in a contractual relationship is to seek the counsel of an experienced business attorney. They will know how to draft an airtight contract that will help prevent disputes and avoid possible contract issues that could harm your business and its bottom line. A business attorney has the skill necessary to create a contract that is free from loopholes and meets the requirements for your specific circumstances.

Contact an Experienced Illinois Business Attorney

If you are a business owner, it’s important to have the guidance of an experienced business law attorney when drafting contracts and entering into contractual arrangements. Located in Rolling Meadows, Litico Law Group provides reliable representation to individual clients, small businesses, entrepreneurs, and corporate owners throughout Illinois for a wide array of business matters, including those involving contracts. We welcome you to schedule a consultation, contact us online or give us a call at 847-307-5942 to learn how we can assist you.