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Mohsen Parsa, Inc.

How an Unclear Contract Puts Your Business at Risk

When you’re excited about a new business venture, you probably just want to jump in and get started. The energy and momentum are there, and you don’t want to imagine all the things that might go wrong. Some entrepreneurs and business owners may even be tempted to jot out the basic details of the agreement themselves, in an informal or do-it-yourself contract.

It happens all the time, and it’s always a bad idea. Not having a clearly drawn-up business contract leaves you vulnerable to any number of things that can go wrong.

Though having a less-than-meticulous contract isn’t likely to impact its enforceability, the clearer your contract, the more protected you will be. Courts indeed have enforced contracts written on napkins or scratched into walls, but you want more than mere enforceability. You want to make sure that your contract looks out for your interests, because you don’t want to put your business or your personal assets at risk – and they will be if your contract isn’t clear.

What is a Contract?

First things first, a contract is nothing more than an agreement between two parties. To be valid, a contract must have an offer, acceptance, and consideration, which means that each party understands the terms, accepts the terms, and offers something in exchange for what they are receiving. A contract that doesn’t clearly state what the parties agree to, or doesn’t describe what each party is offering and getting, may not be valid.

Words Matter

You may have heard someone use the word legalese before. Though legal language is indeed English, it’s practically a different dialect of English. Words that mean one thing in common usage can mean something different in a legal context. It’s important that your contract is written not only in clear language, but that the language translates in a legal setting. If clauses are vague or unclear, a court may decide to apply established rules of contract interpretation. That could lead to the contract being interpreted differently than you intended.

And the Extra Words Matter, Too

You may have noticed that contracts frequently contain a lot of details that pertain to very specific situations. That’s because it’s a lawyer’s job to think of everything that might go wrong and put in the contract how each situation should be handled. For your business’s protection in any number of situations that could arise, your contract should include details about employment agreements, nondisclosure agreements, intellectual property transfers, and assignments. These details will keep you from accidentally signing away your rights.

Not only should a contract clearly describe the transaction and agreement, but it should also explain what the parties agree will happen if one party doesn’t hold up their end of the deal. Your contract should also limit your liability in circumstances beyond your control, and it should make clear that the contract is the whole agreement.

Even though you may want to jump right into a new venture, think of your contract as your armor. It’s there to protect you so that you can go about handling your business. With clear language, your contract will be able to keep you safe from the various things that hopefully won’t happen but certainly could. It’s important that you have your interests protected and the best way to do that is with a professionally drafted contract.

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