Contracts act as the foundation of many business transactions. Sometimes that foundation is strong and holds the deal together. Other times, though, the foundation crumbles leaving one or more parties in trouble. What can cause good contracts to go bad? And what can you do about it?
Are There Cracks in the Foundation?
There are some really common reasons a contract may go wrong:
- Terms Are Not Clearly Defined. The contract should tell all parties what is expected from them. When the details are murky, bad things can happen.
- Provisions Conflict. Nothing spells trouble better than a contract where one provision conflicts with another. In the dispute that is certain to happen, which provision prevails? Going to court may be the only option.
- Interpretations Differ. This may fall under the two reasons mentioned above. It’s still worth mentioning because it underscores the need for clear, unambiguous
- Change Happens. Sometimes the contract is the accidental victim to a market that’s been upended. Or a product or circumstance that has changed. Your good contract may face tough times that can be preemptively addressed, as noted below.
- Attorney Review. Was your contract written or at least reviewed by an attorney …
What can you do to prevent bad contract situations?
Make the Foundation Strong from the Start
Try to include pre-emptive provisions in your contracts. This type of provision can head off trouble down the road.
For example, force majeure provisions protect one or both parties if an unforeseeable event prevents performance of the contract. For example, the EatWell Catering Company agreed to cater a large outdoor event, but the location became unsafe because of local wildfires. The catering company is not responsible for the wildfires that prevented them from holding up their end of the contract.
Where two people are involved, a dispute is possible. Include provisions in your contract that state how to handle disagreements. A choice of law and venue provision might help. Sometimes the parties to a contract can be required to use arbitration or mediation to handle disputes. If the EatWell Catering Company and their client, ABC Enterprises, disagreed on how to execute on the contract, they may take their case to an arbitrator to reach a resolution.
The number one way to avoid bad contracts?
Talk to an Attorney Before You Sign!
The attorneys at the Dillon Law Group have the skills and experience to help you with your business and contract needs. Please call us at 757-962-4796 to set up an appointment or contact us online by using our convenient Contact Form. We assist clients in Virginia Beach, Newport News, and surrounding communities.