Every business owner understands the importance of strong, enforceable contracts. If your company is new, you might be tempted to draft these contracts yourself. But there are some potential drawbacks to doing so. In fact, there may even be cases in which you might not realize you need a contract.
Are you a new business owner? Let us review some of the basics of New York contract law with your company. Our New York business law attorneys can draft contracts for your company.
What Types of Contracts Does a New Business Need?
These are a few examples of contracts your business could use:
- Manufacturing contracts
- Supplier contracts
- Bank loan and line of credit contracts
- Non-compete contracts
- Non-disclosure contracts
- Employment contracts
- Real estate purchase agreements
- Commercial property leasing agreements
- Equipment leases
- Intellectual property licensing contracts
You might think you already know which contracts you will need. Nonetheless, an attorney should review the ins and outs of your business to make sure.
For instance, if you use independent contractors, you may not believe a contract is necessary. However, independent contractor agreements are critical to minimizing the chances of inadvertently forming employment relationships.
Common Contract Issues
Having an attorney draft your contracts increases the chances that they will withstand legal scrutiny. A seasoned New York business law attorney can help your business avoid problems.
Vague or Ambiguous Language
Companies that try to draft their own contracts often use imprecise, misleading, or weak language. This leaves vital contract terms and clauses open to interpretation. This is not a position you want to be in when it comes to enforcing the agreement.
A court may ultimately interpret the contract in a manner that undermines your best interests.
Not Actually Forming a Contract
Certain elements must be present for a contract to even exist.
- Offer and acceptance: One party must clearly and definitely make an offer, and the other party must clearly and definitely accept it.
- Consideration: This is an exchange of something of value between the parties.
- Legal purpose: The contract must not be illegal or violate public policy.
- Capable parties: The contract parties must have the legal capacity to sign and enter into a contract.
- Mutual assent: Sometimes called the “meeting of the minds,” this means both parties intend to be legally bound by the agreement. They must also agree on all essential terms of the contract.
Not Identifying What Constitutes a Breach
When a party breaches a contract, the other party gets to take certain actions. They may include suing for legal damages. Each contract you use should clarify what exactly a breach of the agreement is. Without doing so, a great deal of time, energy, and money may have to be spent proving a breach has occurred.
Failing to Define Damages
If the other party breaches the contract, you may be entitled to seek damages. It’s a good idea to handle this by including a damages clause in your contract. This will put the other party on notice as to the consequences they may face for breaching. It may also deter a breach in the first place.
Not Addressing Alternative Dispute Resolution (ADR)
Some common ADR methods are mediation and arbitration. You may wish to include these as options that must be used before a lawsuit is filed. On the other hand, you might want to limit how and when ADR is used to resolve disputes.
Talk to an experienced New York business law attorney to learn more about ADR clauses in contracts.
Let a Dedicated New York Business Lawyer Advise Your Company Today
When it comes to business contracts, having skilled legal counsel can make a significant difference. Your goal is to have comprehensive and effective agreements in place to protect your business. Rosenbaum & Taylor can help.
If you’re a new business owner wanting to learn more about contracts you may need, reach out to our team today.
