Things That Should Be in Every Contract to Avoid LitigationContracts govern the terms of business relationships and provide important protections for all parties involved. There are certain items that should be included in every written contract or letter of agreement to clarify the nature of the business relationship as well as minimize risk in case of litigation. These include:

Official names of the parties to the agreement. If you are signing a contract on behalf of your company, it is imperative that you do not sign with your own name but instead with the name of the company. Signing with your own name may lead to legal liability for you personally in case of default. There are some instances where you may be required to use your own name — for example, if you are signing as a personal guarantor.

Performance. This part of the contract outlines what each party must do to perform the contract. It should include details on compensation for goods or services and expressly outline what the other party must do to receive the compensation.

Performance time limits. Typically, contracts include time limits on performance — i.e., the goods or services must be delivered within a certain timeframe or in increments of time that is consistent with the intent of both parties to the contract. Some contracts are open-ended with performance expected only at some future time. Time limits on performance of the contract should be detailed as specifically as possible to avoid any confusion.

Payment time limits. Contracts should detail when payments are to be made and any consequences that will ensue if payments are not made on time — for example, late fees, interest charges or attorney’s fees in case a collection action is necessary.

Enforceability. There must be clear language that a contract has been accepted by both parties and is in effect in order for it to be enforceable.

Dispute resolution. A contract should include language that specifies how disputes are to be resolved — i.e., through arbitration or mediation.

Governance. Every contract should include a governance clause that identifies which state’s laws will govern the contract. This is especially important if the two contracting parties are located in different states.

Johnson Legal PC has successfully represented small to medium size businesses as well as corporations.  We understand the ever-changing landscape of the business world and are equipped to quickly adapt and keep clients on track towards organizational goals. Contact us to learn more about how a great corporate attorney can help your business thrive.