Running a business in New Jersey involves entering into various contracts, whether with vendors, customers or employees. These agreements are fundamental tools that define the scope of work, terms of service and the relationship between the parties involved. Depending on the size of the company, you might find that you have many contracts in use at any given time. In fact, ContractSafe reported that a typical Fortune 2000 company can have anywhere from 20,000 to 40,000 active contracts at any given time.
To safeguard your interests, you must ensure that these contracts have certain protections in place. These clauses will not only secure your business dealings but also provide a clear legal framework in case disputes arise. As you draft or review a contract, pay attention to including terms that offer security and clarity for all parties involved.
Ensure clear terms and conditions
The first line of defense in your contract is a clear definition of terms and conditions. You must outline the services or products provided, delivery timelines, payment schedules and any other obligations. Specify the exact nature of what you are promising and what you expect in return. This clarity will prevent misunderstandings and give you solid ground to stand on if you need to enforce the contract.
Define the scope of work
Be as detailed as possible when defining the scope of work. Describe the project’s tasks, deadlines and any deliverables. This detail will help prevent ‘scope creep,’ which occurs when the scope of a project grows beyond the original agreement, potentially without additional pay.
Include payment terms
Be explicit about payment terms to ensure timely and complete financial transactions. State the amounts, due dates and acceptable forms of payment. Include any provisions for late payments, such as interest charges or fees, to encourage on-time payments and compensate you for any inconvenience caused by late receipts.
Provide for dispute resolution
Dispute resolution clauses are important as they set forth the process for handling disagreements. Include terms for mediation or arbitration as a first step before any court action, which can be costly and time-consuming.
Plan for termination
A well-drafted termination clause is important for outlining how parties can end the contract before the completion of the work. It should state the conditions under which you can terminate the contract, notice periods and responsibilities upon termination.
When you are in business, the contracts you create are the lifeline of your company’s operations. These protections will help to minimize risks and provide a clear course of action when things do not go as planned. Protect your business by making sure every contract you enter into includes these essential elements.