Five Common Mistakes in Drafting Business Contracts

Written contracts are necessities in most businesses, controlling a wide range of transactions and other matters. A well-written contract can make business operations predictable and can be invaluable in resolving issues and disputes as they arise. On the other hand, a poorly drafted contract can worsen business problems and leave parties with inadequate remedies.

These are five of the most common contract drafting mistakes made by company leaders and their counsel:

1. Vagueness — Some contracts have terms and conditions that are ambiguous or not sufficiently specific. The parties may, in good faith, have a genuine misunderstanding as to one another’s rights and responsibilities. This can complicate their dealings going forward. In addition, a vaguely worded contract can allow one party to exploit the other. When a contract term is subject to multiple interpretations, one party might use the agreement to shirk their duties.
2. Copying/pasting — Legal forms, including commercial contracts, have become widely available on the internet, some of them at little or no cost. Business owners, especially those running small enterprises, might use off-the-shelf contracts to save time and money on legal fees. The problem is that a contract selected from an online store may be inapplicable or inappropriate for the user’s business arrangements. Also, a form contract may include boilerplate provisions that can mean something different than the user’s understanding.
3. Failing to plan for changes in circumstances — Events such as economic downturns, interest rate fluctuations and supply interruptions are common and usually foreseeable. A comprehensive contract should address possible changes in circumstances to the extent practicable. Contracts should also have provisions governing how the parties will proceed when faced with highly unusual and unexpected events, such as a public health crisis or an environmental disaster.
4. Unspecified remedies — Many contracts fail to address the penalties and remedies that will result if one party fails or refuses to perform its duties. This omission can make it difficult to assess adequate economic damages. The costs of a trial on damages can be very high. A carefully worded liquidated damages clause can help to preempt extended litigation.
5. Lack of forum selection — As communication and transportation systems have improved, the geographic range of business activity has greatly expanded, both across the U.S. and internationally. If the contract lacks a forum-selection clause, a business may have to bring or defend contractual claims far from its base of operations and at considerable expense. In addition, the laws of another state or country may provide an inferior level of legal protections. A well-crafted contract should specify where and under what legal regime a dispute can be litigated.

H. Clay Parker, Esq. in Orlando is one of central Florida’s premier business and commercial litigation law firms. If you have a commercial contract case or related matter, feel free to contact us online or call {PHONE} for a consultation.