Sheehan & Associates, P.L.C.

7 things you should consider when drafting a "standard contract"

Every business with clients should have a well-crafted standard contract form that they use when first entering into a relationship with that client.

However, while it's easy enough to find examples of "standard contracts" online, the one that's right for your business needs to be specifically tailored to fit your actual product or service -- and slightly favor your company in the event of a dispute.

When crafting the document that will control your interactions with clients keep the following in mind:

1. You don't want the contract to favor you so heavily that it could be challenged as inequitable in court.

2. Leave room for your clients to negotiate a little (although it's okay to hope that they don't).

3. Look at samples from other companies in your industry -- they're a great guiding force that can help you see what your own contract might be missing. It can also help you understand industry norms when dealing with clients.

4. Pay specific attention to certain areas of the contract where it's a smart idea to place limits:

  • Minimize your guarantees about your services, products or the results clients can expect as much as possible.
  • While it's okay to offer a warranty or satisfaction guarantee, clearly limit your liability to only what you are willing to forfeit in the event that a client is dissatisfied.
  • Make it clear when and how the client needs to notify you he or she is unsatisfied with your services.
  • Make certain that you include a clause that relieves you from any liability if unforeseen events occur -- like a tornado wipes out your building.

5. Include a section that clearly specifies pricing, payment due dates and any penalties for paying after the specified date.

6. Include a termination clause that will allow you to end the contract in the event that the relationship with your client has broken down and become "unworkable."

7. Include a dispute resolution clause. Experts often recommend that companies ask their clients to agree to binding arbitration with a single arbitrator. Specify who pays for the cost of the arbitration if the company wins.

While you can certainly craft your own standard form for clients, it may be wise to seek legal counsel to help you. Solid business planning and well-drafted contracts can often prevent litigation in the future.

Source: Forbes, "10 Big Legal Mistakes Made By Startups," Richard Harroch, accessed Dec. 15, 2017

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1460 Walton Blvd , Suite 102
Rochester Hills, MI 48309

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