5 costly mistakes when drafting and negotiating contracts

Drafting and negotiating a business contract is a difficult task, requiring not only agreement on an array of important terms but also requiring strict compliance with the requirements of a legally binding contract that reflects the intention and agreement made between both parties. Taking the time to draft, negotiate and carefully execute a contract in consultation with a contract lawyer in melbourne, will save you time, stress and importantly money. Consultation with an experienced contract lawyer will prevent you from falling victim to these common and costly drafting and negotiation errors.

1. Failing to understand and include all terms

Before signing a business contract, it is first important to read and truly understand the terms, obligations and expectations that have been included in the document. An experienced lawyer can ensure that you understand the meaning and legal obligations behind certain terms, which may differ from their everyday use. Furthermore, a lawyer can assist in ensuring that all necessary elements are included in contract. Business contracts are necessarily extensive, to protect the interests of all parties to a wide range of situations in an on going business contract. Overlooking key areas such as terms of renewal or payment leaves your business unprotected by the law and the contract in those areas and therefore vulnerable.

2. Failing to communicate closely with a lawyer

It is important to communicate closely with a lawyer throughout the negotiation and drafting process to ensure that the contract accurately reflects both side’s understanding of the deal. A contract that does not reflect the understanding reached, or fails to include all terms due to infrequent communication is likely to be declared void, leaving your business out of pocket and unprotected. Ensure you take the time to carefully read the contract, and encourage the other side to do the same to avoid any confusion or mistakes.

3. Failing to draft clear and unambiguous provisions

Ambiguous provisions make you vulnerable to the other side finding loopholes that allow them to escape their contractual obligations Drafting a contract with clear and well defined terms greatly increases the likelihood of the contract being fulfilled in the way it was intended. It also ensures that you fully understand your obligations under the contract, protecting you from breaching the contract by failing to uphold an obligation that was written in an ambiguous provision.

4. Failing to investigate future business partners

It is important to thoroughly investigate all persons and businesses that you intend to enter a contractual relationship with. This investigation, known as due diligence should include the financial viability of a proposed partner or company and any previous legal action that the person or company has entered into or has been involved in.

5. Failing to consider terms relating to contractual disputes, termination and damages

Before entering into a contractual relationship it is important to consider and protect yourself from legal or financial vulnerability should the arrangement come to a premature end. Including provisions relating to termination, damages for breaches of the contract and how and where contractual disputes will be resolved, protects you from becoming party to a hasty and unnecessary court case and can provide you with legally binding financial protection should the other party breach a material condition of the contract.

The early stages of entering into a business relationship, in the negotiation and drafting of an eventual contract, is perhaps the most important stage of the process. Early consultation with an experienced contract lawyer can ensure that the final contract is an accurate representation of your agreement, protecting you from later pursuing costly litigation for a contract that does not protect your business interests.

Bio: Laura Costello is in her third year of a Bachelor of Law/International Relations at Latrobe University. She is passionate about the law, the power of social media, and the ability to translate her knowledge of both common and complex legal topics to readers across a variety of mediums, in a way that is easy to understand.